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American Apparel’s Dov Charney: 'We’re Not Going Bankrupt'

(4/5/2011)

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In light of recent headlines reporting that American Apparel (asi/35297) is in financial trouble, Dov Charney said yesterday in an exclusive interview with Counselor that the company would not be going bankrupt. “First of all, the announcement about us possibly seeking bankruptcy protection is something we did as an obligation to shareholders to explain that it’s a possibility, however remote,” said Charney, the founder, CEO and majority stockholder of American Apparel. “In reality, to say that the company is unstable is not accurate.”

While American Apparel, a Counselor Top 40 supplier, suffered net losses of $86.3 million in 2010, its ad specialties sales were only down 1%. Charney, who rarely gives interviews, reached out to shed light on his unconventional company and his role in it. Quoted in the Los Angeles Times as saying the odds are “not even a 1-in-1,000 chance” that American Apparel will file bankruptcy, Charney says the company’s ad specialty sales for the first quarter of 2011 are up, and that he sees a very positive trend in the sale of wholesale merchandise to the ad specialty industry. “Things are healthier this year than last year, across the board,” he said. “We had difficulties last year in the manufacturing process because we had to change over the workers,” he said, referring to an immigration inspection last year that caused the company to replace employees who appeared not to be authorized to work in the U.S. Now with 12,000 employees, the majority of which work in Los Angeles County, Charney says that his workforce has produced more than enough inventory for the season and that its commitment to the ad specialty industry is stronger than ever.

“There’s no chance this industry has to worry about me, or American Apparel, leaving,” Charney told Counselor. “I’ve been producing and selling T-shirts in this industry for more than 20 years and I’m not going anywhere. American Apparel will be producing T-shirts 20 years from now, I assure you. Not only that, but I’m committed personally – we’ve held our inventory that the industry needs. I bought cotton at elevated prices because I didn’t want to let down my clients, who were depending on me. Even if we sell the items at a break-even price, we wanted the items to be here and available. I put some of my own money into the company because I felt it was so important. This is about customer service and having a long-term presence and commitment to the ad specialty industry. When people want to buy a white T-shirt made by American Apparel, I want it to be in stock – that’s important to me. That’s why I walked into the line of fire and said, ‘we’re producing this inventory one way or another.’ People who know me well know that I don’t let my customers down.”

Charney said that he and American Apparel’s management team are very proud of the staff for the way it has produced in the face of financial and inventory pressures. “Despite rising cotton prices and the fact that we had to hire a lot of new workers relating to the immigration intervention we experienced last year, we’re still producing over 45-50 million garments this year – we have over 14 million garments in our LA warehouse ready to ship now,” Charney said. “The ‘can do’, entrepreneurial spirit that I love about this industry is alive and well, and we feel it’s very important for us to be successful as a ‘Made in the USA’ producer to the incredible ad specialty industry. Yes, we got hurt a little bit with the cotton prices, but that’ll subside. American Apparel and I are survivors. We’re going to have a great year and we’re not going bankrupt.”



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