Schneider is tasked with reviving the company as it attempts to recover from years of falling profits at the same time it’s embattled in multiple lawsuits from ousted founder and ex- CEO Dov Charney.
Yet the company, whose stock tumbled to 45 cents a share on Monday and is down 56% this year, is in a risky place.
Charney on two occasions in 2014 was sacked from the business that he founded amidst allegations of sexual harassment and mismanagement.
The stronger dollar has chipped away at America Apparel’s foreign revenues, and the rise in online shopping also has diminished the attraction of brick-and-mortar stores.
(CNN) – Summer shopping may be over for many American Apparel fans.
The company announced that it would be closing the retail locations that were underperforming in over-saturated and unprofitable markets and that it is also planning to look at adding new stores that are in profitable and fast growing territories. “Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability”, she said.
But recently appointed CEO Paula Schneider warned that even with the restructuring, the company may not be able to meet funding requirements in the next 12 months unless additional capital can be raised. In May he filed a $30 million defamation lawsuit against investment firm Standard General, one of American Apparel’s biggest shareholders.
“Historically, the fall season has not been a major focus for the company”, Schneider said.
“The company believes these cases are meritless and intends to vigorously defend such actions and, where possible, pursue remedies against Mr. Charney for his actions”, the company said in its statement.
The company said its initiatives are aimed at “stabilizing the company financially by maximizing retail-store performance and revamping the company’s product merchandise assortment”.
For several years, it has been bleeding money with annual net losses putting it close to bankruptcy.