American Apparel once known for its super-cute dog hoodies and signature tennis skirts is now known more for its unprofessional and reckless behavior in conducting business which lead to the company filing bankruptcy in 2015. What exactly went wrong for a renowned brand which promoted fair wages and “made in USA” values that drove American Apparel into the ground?

Damaging Behavior With Women 

While CEO Dov Charney has “technically” never been found guilty of sexual harassment, he’s accumulated a lengthy list of accusations, lawsuits and bad press against himself and American Apparel. In 2005, A Chicago federal judge dismissed one sexual harassment lawsuit out of three, against American Apparel and Dov Charney. The manager working at a retail store in the Chicago location, alleges she was fired for making a complaint against Charney for creating a “hostile working environment, describing “pornographic” posters hanging at her Chicago store location.

In 2009, American Apparel settles a lawsuit with Woody Allen in which Allen sues AA for using a copyrighted still image from the film, “Annie Hall, for billboard advertisements. Allen, originally suing $10 million, settles for an offer made by the company of $5 million with unsettling comments by Charney regarding his defense team. Despite negotiating down half of the sought damages in the lawsuit, Charney was displeased with the results of his team and the final agreement of the lawsuit.

March of 2011, A former AA employee accuses Charney of sexual assault during an interview, sending her sexual text messages and forcing the victim to perform sexual acts. He’s been accused of masturbating in front of a reporter, harassing women for explicit photos of themselves and accused of rubbing dirt in a store managers face when Charney assumed an employee was sleeping with a certain female employee. Recently, in early September of 2017, Charney made statements regarding relationships in a working environment saying, “Sleeping with people you work with is UNAVOIDABLE” adding on that he regularly has female interns try on clothes for him, calling the act, “completely normal.”

American Apparels’ inability to take actions against Charneys’ inappropriate behavior plays a great role in the downfall of the company.

Never Learning Their Financial Mistakes

In December of 2008, American Apparel was forced to negotiate an extension to pay off their debts as they barely surfaced to keep their heads above water from filing bankruptcy. Luckily, in March of 2009, the company received a whopping $80 million cash infusion from two investors to pay off debts. Later, in June of 2010, a billionaire investor buys 6% of the company stake to revive the struggling companymaking the investor the second largest individual stakeholder of American Apparel. The same year in August, company shares drop 21%, following into 2010 with yet another lifeline of $45 million from Canadian investors.

In July of 2011, two board members resign after disagreements on filing Chapter 11 bankruptcy with ongoing financial issues coming from increasing cotton prices and labor shortage over the 2,500 layoffs proceeding immigration inspections after discovering undocumented workers in the manufacturing factory. Charney continues disputing all speculations of surrendering to bankruptcy despite board members leaving.

March of 2014, American Apparel fights to stay on the New York Stock Exchange while continuing to sink in negotiations over its finance efforts. The company was forced to submit their annual fiscal reports late to NYSE and delaying accurate reports for investors and trade.

American Apparel stopped making a profit in 2009 and officially filed bankruptcy in 2015. After numerous attempts from investors who believed in the brand, American Apparel could not gain control of their finances to sustain themselves out of debt.

Disregard For Law

In July of 2009, a federal immigration inspection exposed 1,600 unauthorized workers in the U.S. employed at L.A American Apparel factory followed by huge layoffs in early September. The company created an advocacy called “Legalize L.A.” which urges to legalize undocumented workers, possibly motivated by Charney’s own immigration status as he’s originally from Canada.

Afterwards, American Apparel was found guilty of directly violating an Americans With Disabilities Law when it chose to terminate an employee for taking medical leave to receive cancer treatments. The company was forced to pay the terminated employee $60,000 in damages ordered by the court.

In the past, the company has held photograph competitions in which the winner would sign a modeling contract and earn a cash prize. However, when a blogger from Texas won the competition, she did not receive a modeling contract or cash prizeAmerican Apparel refused to honor the conditions of the competition and instead chose an alternative winner. AA allegedly operates a “no ugly” policy for retail floor employees where staff members are referred to as “models” to promote conceptions of beauty. Hiring is allegedly based on appearances where prospect employees must be tall, skinny, wear no make-up, have long, natural hair and are considered “good looking.”

In June of 2014, the AA board of directors voted Charney out of his position as CEO due to the growing accusations and investigations against him. The company successfully filed a restraining order against Charney, who attempted to buy excessive stock to regain his original position and failed aims in suing his own brand.

Lack of order within the company eventually lead to unveiling the true operations behind the brand which contributed to the collapse of American Apparel.

Did Dov Charney Learn His Lesson?

Recent reports reveal Charney’s new business venture with LA Apparel, which closely resembles American Apparel regarding clothing style and advertising. After his forced removal as CEO, he wrote an open letter about his personal experiences at American Apparel stating, “I feared, with good reason, that the new management, not understanding what made American Apparel successful in the first place, would try to run the company in a more ‘conventional’ manner.”

Remarks from his letter show his relentless inabilities to accept any mistakes in his professional and personal life and stubborn in sticking to old business habits. All we can do is gaze and watch what happens with LA Apparel in the days to come.

Business Mistakes From American Apparel
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Business Mistakes From American Apparel
After witnessing the rise of American Apparel, we now look at the fall by going into detail exactly what went wrong for the once renowned brand which promoted fair wages and “made in USA” values.

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