American Apparel
American Apparel Inc. is a Los Angeles-based clothing retailer founded by Canadian businessman Dov Charney in spring 1989. Previously known as a "Made in USA" vertically integrated company, following its bankruptcy and sale to Gildan the company markets itself as "Ethically Made—Sweatshop Free," and most of its apparel is made in Honduras and Nicaragua.
History
American Apparel was founded in 1989 by Canadian Dov Charney. For some time, clothes were made in South Carolina.In 1997, the company moved to Los Angeles. Charney sub-contracted sewing to Sam Lim's 50-worker shop under the Interstate 10 freeway in East LA. Months later, the two became partners. In 2000, American Apparel moved into the historic Alameda Square complex in downtown Los Angeles, where it continued to grow primarily as a wholesale business, selling blank T-shirts to screenprinters, uniform companies and fashion brands. Later, the company moved into the retail market.
In 2005, the company was ranked No. 308 in Inc.'s list of the fastest-growing U.S. companies in the United States, with a three-year growth of 440% and 2005 revenues of over US$211 million.
In late 2006, American Apparel went through a reverse merger and became listed on the American Stock Exchange.
It was also one of the few clothing companies exporting "Made in the USA" goods ; in 2007, the company sold about $125 million of domestically manufactured clothing outside of America.
In 2010, American Apparel's auditors, Deloitte & Touche, resigned after informing the company that its financial statements for 2009 may not have been reliable. The resignation led to investigations by U.S. Securities and Exchange Commission and the United States attorney's office for the Southern District of New York.
In April 2011, American Apparel confirmed that it had secured $14.9 million by selling some 15.8 million shares of common stock at 90 cents a share to a group of Canadian investors led by Michael Serruya and Delavaco Capital. The investors also received warrants to buy as much as 27.4 million additional shares. In April 2013, American Apparel issued a private offering of $206 million in senior secured notes. The proceeds were used to repay a long-standing, high-interest credit facility from Lion Capital and Crystal Financial.
In June 2014, the company's board of directors ousted American Apparel founder, chairman and CEO, Dov Charney, after allegations of misconduct and inappropriate behaviour towards employees. As interim chief executive during the search for a permanent CEO, the company's CFO John Luttrell was appointed. As co-chairmen, the company appointed Allan Mayer and David Danziger. Charney, through his lawyers, claimed his ousting was illegal and demanded reinstatement. Soon after, Lion Capital, a key lender to American Apparel, demanded the repayment of a $10 million loan four years early. A failure to repay the loan would trigger a default on a $50 million credit line with Capital One Financial.
In December 2014, American Apparel replaced CEO Dov Charney with fashion executive Paula Schneider.
By September 2015, American Apparel struggled to avoid bankruptcy, as the company needed to repay a debt of $15.4 million due the following month. It struggled to find funds and prepared to report lighter financial results in the coming weeks.
The clothes retailer warned investors in August 2015 that it would not have enough cash to "sustain operations for the next twelve months" which raised "substantial doubt that we may be able to continue as a going concern". The firm filed for Chapter 11 bankruptcy on October 5, 2015. In January 2016, the company rejected a $300 million takeover bid from Hagan Capital Group and Silver Creek, two investment firms aligned with Dov Charney.
In January 2017, American Apparel was acquired for $88 million by the Canadian sportswear manufacturer Gildan Activewear.
Branding and advertising
American Apparel designs, creates and prints its own advertisements. The company is known for its provocative and controversial advertising campaigns, which is largely the inspiration of the company CEO Dov Charney. According to Ad Age, American Apparel's advertising "telegraphs the brand" from person to person. The sexually charged advertising has been criticized, but has also been lauded for honesty and lack of airbrushing.According to CEO Dov Charney, the vision for the brand is that of a "heritage brand. It's like liberty, property, pursuit of happiness for every man worldwide. That's my America." In regards to the company's image overseas, advisor Harry Parnass stated that the brand is about aspiration and that they are "selling the American dream."
American Apparel images often display subjects with their blemishes, imperfections and asymmetrical features highlighted and attached with brief, personal descriptions. Many of the models in American Apparel's advertising are recruited by Charney and his colleagues on the street, or company stores; others are selected after sending their photos directly to the company website.
The company has also used pornographic actors and glamour models in some of its ads including Lauren Phoenix, Charlotte Stokely, Sasha Grey, Euguenia Diyordiychuk and Faye Reagan. Adult entertainment trade magazine Adult Video News cited the American Apparel website as "one of the finer softcore websites going". Some of the company's other ads, which feature nudity or sexual themes, have been banned by various advertising authorities. In 2009, an American Apparel ad which appeared in VICE Magazine was banned in the UK, because the image "could be seen to sexualise a model who appears to be a child". American Apparel complied with this ruling. American Apparel also came under fire for a 2014 ad for mini-skirts, which featured a model bending over so that her underwear was prominently exposed. In 2013, the company released an ad in which the model lay on a bed with her feet up in the air without wearing pants. The company also released an ad in which a model posed in a series of photos focused on her crotch, in which her face was not seen. The UK Advertising Standards Authority criticized the ad for being "voyeuristic" and "vulnerable".
For a time, Charney used a branding strategy that spotlighted his treatment of workers, promoting American Apparel's goods as "sweatshop free". In 2014, the company released a controversial ad with a topless model, and the words "Made in Bangladesh" across her chest, in an effort to draw attention to the company's fair labor practices. In 2008, the company took out a series of political ads featuring the corporate logo that called current immigration laws an "apartheid system".
In 2005, the company was named "Marketer of the Year" at the first LA Fashion Awards. Women's Wear Daily published a survey in April 2007 from Outlaw Consulting, a creative research firm tracking the habits of 21- to 27-year-olds, which ranked American Apparel as the 8th most trusted brand, ahead of such clothing brands as H&M and Levi's.
In 2007, Imp Kerr created a fake American Apparel ad campaign in New York. The stunt lasted almost a year, until it was revealed that the fake ads were actually Photoshop mockups. American Apparel ran a tribute ad on the back cover of Vice magazine showing a compilation of the fake ads.
In January 2008, the Intelligence Group, a trend and market research firm, listed American Apparel as their number two Top Trendsetting Brand, behind only Nike. In 2008, The Guardian named American Apparel "Label of the Year".
From 2009 until 2014, photographers such as Henrik Purienne and David Shama worked on a number of ad campaigns for American Apparel that defined the identity of the brand.
Lerappa
Lerappa is a virtual private island that was commissioned by American Apparel in Second Life to emulate the company's real-world stores. The store was designed by virtual content designer Aimee Weber and was completed and opened in Second Life on June 17 of 2006. The two-story company store was modeled after American Apparel's Tokyo showroom, and included some of the controversial advertising campaigns on the walls around the store. The building was constructed in mostly glass and featured lighting that change when the virtual world reaches night time. Outside the store was a stage where live virtual bands can perform.Official American Apparel clothing, along with planned new lines the company was test marketing, was purchased in virtual form for less than 266 Linden and included a discount code usable at the company's real-life online store. 20 of American Apparel's styles were offered initially, Customers could also purchase real clothing from the company website via the virtual store. Lerappa was intended as an advertising experiment more than a vehicle for electronic commerce. In its first ten days of operation it generated approximately as much revenue as a typical retail location's daily sales.
Second Life protesters held a protest opposing the company's real world use of sexually suggestive imagery in advertising campaigns. In February 2007 the virtual location was attacked by "virtual terrorists" via "white balls" which purposely placed in the store to temporarily obstruct areas of the screen.
American Apparel pulled out of Second Life's virtual arena and closed virtual shop in the fourth quarter of 2007.
Woody Allen billboard and lawsuit
In 2007, American Apparel put up two billboards, one in New York and one in Los Angeles, featuring an image of Woody Allen's character dressed as a Rabbi from the movie Annie Hall and Yiddish text, for a period of one week. According to Charney, the billboards were a satire and allegory alluding to both the scene in the movie and the similar controversy experienced by both individuals. Allen strongly objected to this use of his image and sued the company for $10 million. Allen testified at a December 2008 deposition that he considered the company's advertising to be "sleazy" and "infantile".Although the company said as early as May 2008 that the billboards were meant "strictly as social parody", there was much debate over whether American Apparel's lawyers would use Allen's personal life, namely his affair with Soon-Yi Previn as their defense at the trial. Charney claimed that these rumors were outright false and that his speech was protected by the First Amendment. In May 2009, the case was settled by American Apparel's insurance carrier for $5 million, with the insurance company paying the bulk of the settlement. The settlement was for half of Allen's initial demand. Dov Charney said that if it had been up to him, he would have continued the case and taken it to trial.