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| American Apparel |
American Apparel (AMEX: APP) is a clothing manufacturer in the United States. It is a vertically integrated clothing manufacturer, wholesaler, and retailer that also performs its own design, advertising, and marketing. It is best-known for making basic, solid-color cotton knitwear such as T-shirts and underwear, but in recent years it has expanded—to include leggings, leotards, tank tops, vintage clothing, dresses, pants, denim, nail polish, bedding and accessories for men, women, children, babies and dogs in various prints and colors.
American Apparel was founded in 1989 by Canadian Dov Charney, who had a long history with T-shirts and a fascination with American culture. It was during Charney's freshman year at Tufts University that the company took on the name "American Apparel" and began to experiment with screenprinting, importation and other parts of the apparel business. In 1997 after a variety of iterations, including a period of manufacturing in South Carolina, the company moved to Los Angeles. Charney began to sub-contract sewing with Sam Lim who, at the time, had a shop with 50 workers under the Interstate 10 freeway in east LA. Months later the two became partners. In 2000 American Apparel moved into its current factory in downtown Los Angeles where it continued to grow primarily as a wholesale business, selling blank T-shirts to screenprinters, uniform companies and fashion brands.
After its success as a wholesale brand, the company moved into the retail market. The company was ranked 308th in Inc.'s 2005 list of the 500 fastest growing companies in the United States, with a 440% three-year growth and revenues in 2005 of over US$211 million.
In late 2006 American Apparel announced a reverse merger, in which Endeavor Acquisition Corp., a special-purpose acquisition company founded in July 2005, bought the company for $360 million. The merger closed in December 2007, at which point American Apparel became a publicly traded company. As a result, Charney became the President and Chief Executive Officer of the publicly traded company known as American Apparel, Inc. He remained the majority shareholder.
It is also one of the few clothing companies exporting "Made in the USA" goods and in 2007 sold about $125 million dollars of domestically manufactured clothing outside of America. The company also promotes a number of progressive policies including immigrant rights and labor policies the company dubs "sweatshop free."
In 2010, American Apparel's auditors, Deloitte & Touche, resigned. The company was threatened with being delisted from the New York Stock Exchange for not submitting a quarterly earnings report on time. It faced lawsuit from some of its investors. Revenues declined, and total debts rose to $120 million, and the company was in danger of defaulting on a $80-million loan from British-based Lion Capital. Commenting on the loss of 1,500 workers due to concerns over illegal immigration (see below) Charney said "It broke our efficiencies and generated a situation where we were late delivering garments. It lost us an enormous amount of money. It cost us agility."
American Apparel bases its manufacturing in an 800,000-square-foot (74,000 m2) factory in downtown Los Angeles, California. The company also owns and operates its own fabric dye house, garment dye house, and knitting facility, all based in Los Angeles. American Apparel has decided not to outsource its labor, paying factory workers an average of over twelve dollars an hour. Garment workers for similar American companies in China earn approximately 40 cents per hour. It claims to have the 'highest earning apparel workers in the world'.
The company uses "team manufacturing" which pools the strongest workers towards priority orders. Each team functions autonomously and determines its own daily production schedule, giving them control over their own hourly wages. After its implementation, garment production tripled and required a less than 20% staff increase. The factory claims to have the capacity to produce 1 million shirts per week and manufacture 275,000 pieces a day. According to The New York Times it is the largest single garment factory in the United States and employs over 4,000 people across two buildings.
A banner on top of the downtown factory states "American Apparel is an Industrial Revolution." As of December 2008, banners on top of the factories state "Legalize LA" and "Immigration Reform Now!"
American Apparel designs, creates and prints its own advertisements. The company is known for its provocative and controversial advertising campaigns, which is largely the inspiration of the company CEO Dov Charney. According to Adage, American Apparel's advertising 'telegraphs the brand' from person to person Their print campaigns are widely considered to be some of the best in the industry The sexually charged advertising has been criticized, but has also been lauded for honesty and lack of airbrushing. American Apparel images often display subjects with their blemishes, imperfections and asymmetrical features highlighted and attached with brief, personal descriptions. Many of the models in American Apparel's sexual advertising are recruited by Charney and his colleagues on the street, or company stores; others are selected after sending their photos directly to the company website. Despite this, many consumers have noted the relatively small sizing American Apparel employs, advising other shoppers to buy larger sizes than normal, though this may be the result of other retailers' use of vanity sizing to market to an overweight American public. Some critics have labeled their models as "cocaine-chic", and another describing them as "pre-pubescent".
For a time, Charney promoted a branding strategy that spotlighted his treatment of workers as a selling point for the company's merchandise, promoting American Apparel's goods as "sweatshop free." In 2008, the company took out a series of political ads featuring the corporate logo that called current immigration laws an "apartheid system." In regards to the company's image overseas, advisor Harry Parnass stated that the brand is about aspiration and that they are "selling the American dream." He dismissed competitors who do the same but refuse to manufacture in America.
The company has also used adult film actresses in some of its ads including Lauren Phoenix, Charlotte Stokely, Sasha Grey and Faye Reagan. Some of the company's other ads, which feature nudity or sexual themes, have been banned by various advertising authorities. Most recently, American Apparel agreed to comply with a UK ruling to not run an ad that appeared in VICE Magazine because it had the potential to "widely offend" people.
In 2005 the company was named "Marketer of the Year" at the first-ever LA Fashion Awards. Women's Wear Daily published a survey in April 2007 from Outlaw Consulting, a creative research firm tracking the habits of 21-to 27-year olds, which ranked American Apparel as the 8th most trusted brand, ahead of such clothing brands as H&M and Levi's. In January 2008 the Intelligence Group, a trend and market research firm, listed American Apparel as their number two Top Trendsetting Brand, behind only Nike. In 2008, The Guardian named American Apparel "Label of the Year".
In 2007, Imp Kerr created a fake American Apparel ad campaign in New York. The stunt lasted almost a year, until it was revealed that the fake ads were actually Photoshop mockups. In a final twist, American Apparel ran a tribute ad on the back cover of Vice magazine showing a compilation of the fake ads.
American Apparel also briefly experimented with advertising in Second Life with a virtual store on the island named Lerappa but shuttered the operation in the fourth quarter of 2007