American Apparel In Financial Peril: Did The Company Expand Too Fast?

americanapparel.net

While some critics have blamed American Apparel's eccentric CEO, Dov Charney, for the company's financial troubles of late, other fashion-business experts say the Los Angeles-based clothing maker expanded too fast, based its aesthetic on basic looks that have yet to change much, and has become lost among other labels that now offer some of the same, ethically solid marketing foundations.

The U.K.'s Guardian newspaper this week took a deeper look at American Apparel's problems, with Pearse McCabe, planning director at global design consultancy Fitch, weighing in:

"The level of expansion has been breathtaking. That puts a lot of pressure on what their USP was in the first place, which was to be a trendy niche brand. In addition, I feel the brand has stood still. I see exactly the same things in the Oxford Street store today as I did when I walked into their flagship LA branch the week it launched."

The clothing maker has added more than 100 stores to its near-280 store total in recent years. But another possible problem, states the Guardian, is that its mid-priced basics -- t-shirts, sweatshirts, cotton dresses -- could seem overpriced in this prolonged recession.

And although American Apparel renewed a hip identity for "made in America," "sweatshop free" fashion and eco-friendly clothing, the rest of the world has caught up and competition in the sound-mind fashion game is fierce.

Of course, more than any other factor, fashion has taken a big hit from this bummer economy.

"It can happen to the best of companies ...," Bryan Roberts, research director for retail analysts Planet Retail, told the Guardian.

American Apparel CEO Dov Charney this week blamed a federal immigration crackdown and his subsequent loss of workers on the company's problems, which include a possible delisting by the New York Stock Exchange, $120 million of debt, and a shareholder lawsuit.