American Apparel CEO Responds to Restructuring Reports

Despite disappointing sales and press reports alleging financial turmoil, American Apparel (asi/35297) is poised for a strong year, said CEO Dov Charney, in an exclusive interview with Counselor in February.

Charney spoke with Counselor in the wake of a report in The Wall Street Journal that indicated the Top 40 supplier had reached out to restructuring advisers amidst a battle with weak sales and a heavy debt load. The report, which cited unnamed sources, said American Apparel had contacted the law firm Skadden, Arps, Slate, Meagher and Flom LLP to review restructuring strategies. Organizing bondholders for the Los Angeles-based clothier are interested in restructuring, the report said. A separate report from Bloomberg Media, which also cites unnamed sources, indicated American Apparel has been working with investment bank Brean Capital LLC as losses allegedly piled up.

While Charney said he couldn’t speak at length about the situation, he called the WSJ report a “mischaracterization,” adding that Skadden has been American Apparel’s outside counsel for several years. More importantly, he said, ASI distributors need not fear any disruption in service or product availability from American Apparel. “This is a critical year for us to bring new products to market,” said Charney. “We are expecting a record year.”

Nonetheless, the company has some work to do to hit a new high mark. In January, American Apparel reported that total sales dropped 1%, with online sales dipping 6% and comparable retail store sales slipping 5% when analyzed against the prior year. The bright spot in January was the company’s 7% increase in wholesale revenue, which includes sales to the ad specialty industry.  “The 7% growth in wholesale net sales is noteworthy given it is on top of a 13% increase over last January,” Charney said.

“Our management team is energized and we are excited about our prospects for Spring and Summer 2014 as well as for the calendar year as a whole,” Charney said.

American Apparel ranks 14th on Counselor’s list of the 40 largest suppliers.