Hire Me As APP CEO

American Apparel(APP) is an American clothing manufacturer, distributor and retailer. APP suspended their CEO Dov Charney, but have kept him as a consultant pending further investigation into his conduct. To say that APP is struggling would be a huge understatement. If New York investment firm Standard General didn't acquire Charney's 44% stake in the company for $25 million and pay for a $10 million loan at 20% interest from Lion Capital, the company would probably be filing for brankruptcy.


Investors should stear clear of APP, as it has negative equity, negative earnings and no free cash flow. APP's long term debt of $214 million is alrarming, especially since the company only did $137 million in sales and $72 million in gross profit. However, I think that Standard General should appoint me as CEO, and I'm only asking half of Charney's $800,000 salary to turn things around, demonstrating my commitment to cutting costs.

The first thing I would do is cut of the retail arm of the company. With 260 stores in 19 countries, the company has to pay rent, employee salaries and shipping for each location. Sales are flat and customers aren't willing to pay $20-$30 for basic tees and apparel, and I can't blame them. This would save the company millions, and force it to streamline its operations by focusing on its manufacturing business. APP could cut their prices and hope to attract more retail customers, but they would still have to pay operating costs without the qaurantee of increased sale volume, as their inventory depreciates.

APP prides itself as an American manufacturing company with vertical integration. I like the quality of American Apparel and use their products for my clothing brand. Their wholesale clients are the key to their success. Since APP has expanded, their brand and the quality of their clothing is known worldwide. Clothing brands and screen printing companies know that they are unmatched when it comes to fit and feel. APP already has a wholesale client base that knows the quality of their products and are willing to buy, so why are they focusing on retail instead of wholesale? APP's wholesale selection is not as extensive as their retail offerings. APP should cut their retail and put all of their inventory on their wholesale website. APP could then be more strict in offering credit to wholesale clients, until things turn around. By offering more products on their wholesale site, clients will be willing to buy some of the new inventory that would only be available through retail. APP can then see which products are being bought, and stop manufacturing the ones that aren't. By focusing on wholesale and manufacturing, the company could have a chance to turn things around.

Standard General, the ball is in your court. I've got some more ideas we can discuss once I receive my employment offer. I know what I've proposed is a really simple fix, but it's better than what Charney has done in his tenure.

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