American Apparel Announces Store Closures and Layoffs

Clothing retailer American Apparel has announced it will shut stores and lay off employees in an effort to save $30 million.

The company made the announcement Monday, July 6^th, saying the decision was part of its strategic turnaround plan, including a redesigned fall merchandise line. For the first time in the company’s history, it will begin a re-merchandising process in the fall. The cost reduction of the strategic plan will include “reducing operating expenses” over the next 18 months.

“Among other initiatives, cost-cutting measures will include closing underperforming retail locations to drive productivity improvements. In connection with these store closures, the Company will streamline its workforce to reflect a smaller store footprint and general industry conditions. Going forward, the Company will look to add new stores in profitable fast-growing territories while reducing its footprint in unprofitable and over-saturated markets,” said the company in a statement.

The company has not disclosed which stores will be shuttered, or how many employees will receive pink slips. American Apparel is commenting on the nearly 20 lawsuits it is facing from company founder Dov Charney. The former CEO was ousted from the company in December 2014 after months of suspension.

The latest ad campaign from American Apparel (Photo Credit: American Apparel)

“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,” adds American Apparel in its statement.

Even if American Apparel increases revenue and cuts costs, there can be no guarantee that the company will have sufficient financing commitments to meet funding requirements for the next twelve months without raising additional capital, and there can be no guarantee that it will be able to raise such additional capital.

"We are committed to turning this company around. 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. Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years," said Paula Schneider, recently appointed Chief Executive Officer of American Apparel.. "Our customers, employees, and local communities around the world believe that American Apparel is an iconic brand that deserves to succeed. My job is to make that a reality."

American Apparel has approximately 10,000 employees and operates 239 retail stores in 20 countries including Canada.