Washington, March 28: Dov Charney, the fast-talking CEO of American Apparel, is scrambling to keep his beloved company out of bankruptcy.
Charney – whose libertine lifestyle and racy marketing campaigns kept the clothing chain controversial and in the minds of its young shoppers – had to give up a large equity stake in the operation to a private equity firm that rode to his rescue, the New York Post reported.
He also was forced to slow the chain’s rapid rate of expansion and had to deal with stores that couldn’t keep their shelves fully stocked thanks to the viselike grip on cash kept by Lion Capital, the London-based investment firm whose March 2009 financing deal saved the company.
Lion Capital “has Charney over a barrel,” said one investor close to the retailer.
“On one hand, it’s hard to argue with [Lion Capital’s] demands for financial discipline,” the source said. “But you also have to admit it has taken a little bit of the fun out of the whole enterprise.”
It certainly didn’t help Mr Charney’s mood when, on Friday, the racy retail chain’s shares plunged 17 per cent after it reported its fourth-quarter profits dropped a jaw-dropping 23 percent.
While soaring costs and anemic sales sapped profits, investors were likewise rattled as the company delayed giving an outlook for 2010, citing restrictions imposed on its operations by lenders.
That spooked investors.
American Apparel, which has outlets in Austrlia, has also had trouble from the Federal Government.
Last year the Immigration and Customs Enforcement agency charged that one third of the workers at the retailer’s Los Angeles factory were illegal immigrants.
—Agencies