American Apparel ousts controversial CEO

The board of fashion retailer American Apparel has ousted its controversial founder and chief executive officer Dov Charney, citing an “ongoing investigation into alleged misconduct”.
The board voted on Wednesday to suspend Charney effective immediately

and notified him of their intention to terminate his employment as president and CEO, which will be effective following a 30-day cure period required under the terms of Charney's employment agreement.

Explaining the decision, board member Allan Mayer said: "We take no joy in this, but the board felt it was the right thing to do. 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."

Charney founded American Apparel as a wholesale T-shirt business in 1998 and he has built the brand into a fashion empire that current employees more than 10,000 people and operates 248 retail stores in 20 countries. However, over the years Charney has been the centre of a number of allegations, including sexual harassment suits filed by employees and he was accused of choking a store manager, all of which were defended by American Apparel.

The board wouldn’t specify the details of the current “alleged misconduct”, but the timing of Charney’s exit comes as the company is struggling with weak sales and heavy debt. In May the company reported a net loss of 5.5 million dollars for the three months ended March 31.

The company also stated that because of the management changes, it “may have been deemed to have triggered an event of default under its credit agreements” and that it would be in discussions with its lenders for a waiver of the default.

American Apparel names interim CEO

Replacing Charney will be American Apparel’s chief financial officer, John Luttrell who has been with the fashion chain since February 2011. In addition to his new role as interim CEO, Luttrell will continue to serve as executive vice president and CFO. Prior to joining American Apparel, Luttrell served as executive vice president and chief financial officer of Old Navy, The Wet Seal and Cost Plus.

Commenting on his vision for the future of American Apparel, Luttrell said: "We have one of the best known and most relevant brands in the world, with employees who are second to none; I believe we have a very exciting future.

"Our core business—designing, manufacturing, and selling American-made branded apparel—is strong and continues to demonstrate great potential for growth, both in the U.S. and abroad. This new chapter in the American Apparel story will be the most exciting one yet."

Luttrell also reiterated that American Apparel would remain committed to its sweatshop-free, Made in USA manufacturing philosophy, a policy the Los Angeles-based fashion brand has become known for.

Also effective immediately, the board appointed Mayer and David Danziger as co-chairmen to replace Charney as chairman of the board. Danziger confirmed that the board would be working with a search firm to indentify candidates for the permanent job of CEO.

Charney is the company's largest individual shareholder, with about 27 percent of American Apparel stock, according to S&P Capital IQ.

Image: Dov Charney – American Apparel