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Michael Hamlett Jr
Michael Hamlett Jr
Articles (70)  | Author's Website |

Hire Me As APP CEO

August 13, 2014 | About:

American Apparel (APP) is an American clothing manufacturer, distributor and retailer. APP suspended its CEO, Dov Charney, but has 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 off 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 its prices and hope to attract more retail customers, but it would still have to pay operating costs without the guarantee of increased sale volume, as its inventory depreciates.

APP prides itself as an American manufacturing company with vertical integration. I like the quality of American Apparel and use its products for my clothing brand. Their wholesale clients are the key to their success. Since APP has expanded, its brand and the quality of its 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 its products and are willing to buy, so why is it focusing on retail instead of wholesale? APP's wholesale selection is not as extensive as its retail offerings. APP should cut its retail and put all of its inventory on its wholesale website. APP could then be more strict in offering credit to wholesale clients, until things turn around. By offering more products on its 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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