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Troubled clothing company American Apparel is all over the news again. This time, though, the situation seems dire. CEO Dov Charney, who we’ve spoken to in the past, is being sued for an enormous sum of money by five former employees alleging sexual abuse. Stop us if you’ve heard this one before (although this go-round is a bit more complicated than usual). Compounding his legal troubles, Charney’s company is still on the rocks financially; rumors swirl that AA will have to file for Chapter 11 bankruptcy sooner rather than later.
Charney agreed to speak with us about his latest adventures, both personal and professional. He refused to say anything on the record about his most recent sexual harassment suits, although we did speak to his lawyer Stuart Slotnick, who told us, “These women have fabricated claims. These claims are a result of their intention to try and cash out at the company’s expense with no legitimate basis to do so.” Slotnick also confirmed that Charney had indeed had a “consensual relationship” with plaintiff Kimbra Lo after she had left the company.
Charney, who admittedly is a master of spin and has a certain charisma, was open — in his way — about American Apparel’s financial problems, his “many followers,” and the travails of Pee Wee Herman.
Let’s talk about finances. Does Lion Capital [the lender that bailed the company out with an $80 million loan last year] lose confidence when lawsuits like this happen?
My assessment of Lion Capital is that they’re a very good financial partner and they would not lose confidence in me personally as a result of fraudulent claims. They’re perfectly able to make that assessment because there’s intelligent leadership in that organization. We’re faced with some challenges. But we have a great business and people love our product and we’re having no trouble selling it.
Then I don’t understand why two Lion Capital partners left the board.
They left the board for reasons that are completely unrelated to financing. The reason they left the board is that in order for them to have autonomy as a financial partner, they can’t also be on the board. Because there are certain things they might want to do — there are conflicts of interest in corporate governance roles as board members.
How do you battle the perception that the company is failing?
This story’s not over. I’m 42. I mean, Calvin Klein went from 300 million dollars in sales to 30, everyone thought he was over. Tommy Hilfiger had ups and downs. I’m 42 and everyone else is in their 60s. I’m the youngest guy out there and what’s disappointing is that the youth media is killing their babies. There’s nobody my age running a major apparel company. Nobody. I’m a stand-alone. We’re coming off of a crazy recession that damaged many businesses, including the Village Voice. It’s easy to be facetious.
What else is contributing to AA’s money troubles?
As a result of the environment of uncertainty related to the recession, we got to a late start rehiring workers [ed. note: The company lost workers after the government found out it had hired up to 1800 illegal immigrants] . By the time all the workers were replaced, it was mid-summer. Bathing suits were arriving in stores in september. Cost overruns were 25% over the norm. We had done a massive ad campaign which cost over a million dollars. I was sleeping in the factory one or two nights a week and organizing the parking lot for an influx of 18,000 interviewees. We had a net retention of 2700. The sewing process got slowed by the inefficiencies. That being said, this is American Apparel and we believe in the can-do spirit, and with a little bit of innovation and a bit of passion we’re on the dawn of the summer season, when we make most of our money.
What about the possibility of filing for Chapter 11?
I can understand that point of view, and many business people in my position would explore it, but I’m not wiling to do that. I believe in this company and I see my suppliers as partners in the company as stakeholders. And I believe that through hard work, passion and resolve we’re going to have a great year and it would be foolish to even consider doing something like that. That being said, it’s a risk factor that we’ve disclosed to shareholders.
What about the idea that some people have suggested of you not being in charge of the business side of it — being creatively in charge but not running the business?
I’m not just a creative guy, I’ve built this company from the ground up. I have an intimate understanding of the manufacturing and the supply chain and I personally built these stores and I manage the product assortment. It’s not really feasible that I’m just gonna walk off into the sunset. When other companies have tried to reduce the role of the founder, like they did at Apple with Steve Jobs, they later realize that can often be counter productive.
When money’s not being made, people get scared. What I am committed to is building the best and the brightest team of people to run this company to bring it to its highest level and potential. It would be preposterous for anyone to claim that I’ll be able to do it on my own — I want to hire people that are better than me in their respective fields and I’ve recently made a number of executive hires. But to think that I’m somehow supposed to just sit there and play with my camera, I don’t think that’s realistic.
Do you think that consumers are scared away by the sight of a company in some kind of personal turmoil?
Hopefully they’ll find it intriguing or it won’t cross their mind. I’ve watched people enter and exit the store complaining about an ad or complaining about me personally, but I’ve watched them leave with a loaded shopping bag on the way out. A lot of this is entertainment. I think Oscar Wilde once said if there’s no scandal in your life, you’re nobody.
But it all adds up to a bad image for you and the company overall. You still get bad press all the time, for example at Gawker.
I am just touched that I am one of Gawker’s death subjects. I’ve won an award, they’ve given me an award for my ad campaign, I think it was the sexiest ad campaign of the year. I’m touched by all the attention they give me. I received a number of prank phone calls yesterday, and one prank caller from London who I found remarkably interesting said, you know, that the reason she’s so excited about me is that because she thinks there’s a movement that is rejecting the notion that one needs to live a restrained life in order to make it right now. It’s this agreement that’s taken place between the politically correct left and the religious right, and we’re experiencing a kind of social McCarthyism. Things are so tight that you can’t just enjoy yourself and be free and transparent and open without getting stabbed for it. I hope to be a trailblazer, or someone on the forefront of thinking differently and being different.
The thing is, we’re talking about this PC left, this religious right, god forbid you make a joke that’s wrong or you have an outburst. Pee-wee Herman — look at the disruption to the career of Pee-wee Herman, because of some minor improprieties. Look at how amazing an actor Paul Reubens is. The media and law enforcement really framed him up good on some minor improprieties at the expense of society. He’s such a great individual and such a great actor. Look at how endearing his acting abilities are. It’s a witch hunt. It’s minor stuff that had no meaning. What did he do? Played with himself in a dirty theater? That’s what those theaters are for, I thought.
I think Charlie Sheen, the obsession everybody had with Charlie Sheen — the guy went authentic. People were enamored by him because of the authenticity he provided. Everyone in Hollywood is so bloody frightened right now. Some may argue that he went off the deep end, but on the other hand, everyone wants to tune into his story.
How do you deal with your bad reputation?
I don’t know if my reputation is bad. I mean, you’re free to say that. I don’t know if it’s for sure that one could stamp “bad reputation” on my forehead. There’s a class of people who don’t think Michael Jackson was guilty of some of the things he was accused of. Not everybody believes what they read. The media — there’s a nasty streak in the media. They succumb to stereotype. You know, I find myself reading stories that are salacious. What are you going to do? I know of many people that are excited to meet me and tell me that they’re inspired by me. It’s kind of interesting because there are so many people that admire what I do. I have a very large following.
I have academics that call me frequently and write me. I have employees that are extremely loyal to what I do — my mission. I have fans.
What’s your next move? What’s the plan?
We’re going to kick things into gear. We’re working the factory, we’re working the stores, we’re working distribution, we’re working the website, we’re turning up the passion, we’re rolling up our sleeves, and we’re gonna push as hard as we can to have a phenomenal year by increasing the top line and watching our expenses. The only mitigating factor that’s difficult to contend with is the cotton price, but that will come and go. This is about retail and apparel athletics right now.
Thoughts on the new AA jeans?
They’re going to make us a ton of money.