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CEO Plans To Exit American Apparel

Paula Schneider, CEO of Top 40 supplier American Apparel (asi/35297), has resigned from the company, effective October 3, according to multiple reports.

Women’s Wear Daily reported on Thursday that Schneider, who joined the company in 2014, is to be succeeded by the company’s general counsel and chief administrative officer Chelsea Grayson. Grayson’s LinkedIn page lists her current title as chief executive officer, a change made this month.

The change comes one month after Reuters reported that American Apparel has hired global investment bank Houlihan Lokey to explore a sale. In her resignation letter to the board, which was obtained by WWD, Schneider said “the sale process currently underway for all or part of the company may not enable us to pursue the course of action necessary for the plan to succeed nor allow the brand to stay true to its ideals. Therefore, after much deliberation, and with a heavy heart, I’ve come to the conclusion it is time for me to resign as CEO.”

Schneider’s exit follows the recent departure of former Liz Claiborne Inc. chairman and CEO Paul R. Charron, who was appointed to lead the board in March. He was succeeded by Brad Scher, founder and managing member of New York consulting firm Ocean Ridge Capital Advisors.

In a letter distributed to company employees on Thursday, which was also obtained by WWD, Scher said American Apparel has “been evaluating opportunities to attract investors to fuel the growth of the brand. Business will continue as usual.”

A company spokeswoman declined to comment on the record regarding Schneider’s departure.

An apparel industry veteran, Schneider joined American Apparel as CEO in January 2015 following the ouster of CEO Dov Charney for alleged misconduct and violations of company policy.

Last October, American Apparel filed for Chapter 11 bankruptcy protection and received court approval for a restructuring plan as Charney tried to win back control of the company, making an unsuccessful bid to the tune of $300 million this past January. When reports of a sale came out in August, Charney told Reuters he would examine the company’s asking price before making a bid, adding that he is currently developing a new apparel entity.

American Apparel emerged from bankruptcy in February, becoming a private company in the process. The supplier converted approximately $230 million in debt into equity to receive $40 million in exit capital and access to a $40 million loan.

In April, the Los Angeles Times reported that the company was mulling the outsourcing of some garments to other American manufacturers. At the time, American Apparel laid off approximately 500 workers as part of what Schneider called “a redesign of our production process” in a letter to employees. The company has also recently closed a dyeing facility in Hawthorne, CA, and a location responsible for knits, located in Los Angeles, will close in October.

Since then, multiple reports have suggested that American Apparel is considering moving its manufacturing from downtown Los Angeles to an area of the country with lower wages. The lease on American Apparel’s Los Angeles facility, its largest location, expires in 2019. The Los Angeles Times reported that even with a move, the company would plan to keep its headquarters and design offices in Los Angeles.

American Apparel ranks 16th on Counselor’s list of top 40 suppliers, with estimated 2015 revenue of $98.5 million.