American Apparel (APP) Ousts Controversial CEO Dov Charney, Stock Rises

Jessica Beeli  |

American Apparel (APP) , the Los Angeles based retailer, has fired its controversial CEO Dov Charney. This decision was met well by the markets, with shares rising 6.72 percent to $0.68.

Few details about the circumstances of Charney’s removal have been shared with the public, but Allan Mayer, a board member, said that Charney’s dismissal results from an ongoing investigation into the CEO’s alleged misconduct.

"The board felt it was the right thing to do," Mayer said. "Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are still ahead.”

Although shares are gaining, the company remains a penny stock, with shares under $5, and has stayed there since 2009. American Apparel has been facing considerable losses over the past few years, and the company has not reported a profit in 16 of the past 17 quarters. The retailer reported a net loss of $37.3 million in 2012 and $106.3 million in 2013.

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The stock has shrunk substantially since 2007, when it traded as high as $15 a share during a period of rapid expansion for the retailer. But the financial crisis brought a decrease in consumer spending from which the company still hasn’t recovered.

American Apparel was founded by Charney in 1988 while he was a student at Tufts University. The Montreal-born entrepreneur moved the company to Los Angeles in 1997.

The company has become well known for its unorthodox business methods and sexually-charged advertising campaigns. Charney has become no stranger to pushing boundaries. Some of his more controversial advertisements include hiring a 62 year old to appear in a lingerie campaign and featuring shots of his own rear end in a print ad.

Charney has also faced accusations of sexual misconduct by employees. Allegations include Charney walking around the factory and holding meetings in his underwear. The former CEO has been the target of multiple sexual harassment lawsuits. Charney acknowledged relationships of a sexual nature with employees, but ensured that they were consensual.

This March American Apparel announced plans to sell $30.5 million of stock to keep up with debt payments. The company also stated that it could seek a waiver under its credit agreements that would prevent the company defaulting as a consequence of Charney’s departure. Nonetheless, it remains unclear whether Charney’s termination will revive the struggling company in the long run.


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