The controversial 45-year-old American Apparel founder has high hopes for the company despite its recent financial woes. He also says he isn’t stepping down anytime soon and that he doesn’t technically believe in “Made in the U.S.A.”
Bloomberg/Bloomberg
Dov Charney's three-legged dog is missing.
The American Apparel chief executive officer is 40 minutes late for an interview at the company's headquarters in downtown Los Angeles to talk about making clothes in America and the merits of being a public company. But right now the focus is on finding Marcel. So Iris Alonzo, a creative director who's also an assistant of sorts to Charney, apologetically asks for a venue change to the CEO's home in Echo Park while he continues his search — the dog belonged to an employee until recently, she explains.
When we pull up to the concrete mansion, Charney is out of breath but with good news: He just recovered the pointy-eared pup from a neighbor's yard, remaining limbs intact. The front yard where he greets us is strewn with ornaments of giraffes, though when asked if he likes the animal, Charney is confused by the question.
As quickly as one problem is solved, another one emerges: Charney is now occupied with figuring out how to transport a tall, thin female employee lingering outside with him back to the factory. He muses she might try Uber, but then lights up. Why not jump his beige Cadillac that's been sitting unused in the driveway? Excitedly, he calls for the housekeeper, who is bringing Marcel indoors, to get jumper cables then leaves them to it.
Moments after sitting down in the living room, there's a loud, grinding noise, presumably from the newly revived car. Charney leaps up and runs outside.
"Whoa, whoa, whoa, whoa, whoa," he exclaims. "What did you guys do? Did you hear that noise? Hear it?"
There's a brief exchange; the phrases "fuck Uber" and "give her $100 from my roll for gas" are audible. He returns after a few minutes, finally ready to talk.
This is, if anything, a somewhat mellowed Dov Charney. After all, the scruffy, dark-haired CEO is now 45. He founded American Apparel in 1997, and over the last 17 years has built an extraordinarily recognizable brand that generates more than $600 million in sales a year.
But over the last five years, the financial story at American Apparel has been less than rosy. The retailer has been hit by almost everything that can go wrong for a corporation — an immigration raid in 2009; the resignation of its auditor in 2010; embarrassing lawsuits from former employees, shareholders, even Woody Allen; and a transition to a distribution center that was so disastrous that fixing it required Charney to live there for months. While the company was able to avert bankruptcy three years ago, it hasn't posted an annual profit since 2009, and analysts expect another loss for 2013. As a result, its stock has plunged drastically, closing below $1 every day last week.
Yet Charney, who owns almost half the company's shares, is unflaggingly optimistic about American Apparel's future. He says its 247 stores could be 20% more productive with the right tweaks, the online business could double, wholesale could grow by 20% to 30%. It could even develop a $100 million third-party retail business, selling items like American Apparel nail polish at drugstores or having hooded sweatshirt blowout sales at Costco, and is doing the research on such a venture now, he says.
When asked if American Apparel might finally turn a profit in 2014, however, Charney lets slip a little more than he probably should.
"Well, there's different ways one defines profitability — from a GAAP point of view, don't expect us to be profitable, but from an EBITDA point of view versus interest…" Charney says, referring to different accounting methods, before suddenly catching himself. "I really can't speak to that actually right now, it would be unprofessional, it would result in a whole bunch of problems for both of us, so I can't really say that. But I do intend to focus on improving the profitability of the company, and I'm excited about our prospects for this year, and I will publicly disclose our projections soon to the market."
While American Apparel's stock is well off its high of $15.80 in 2007, Charney's not obsessing over the price on a day-to-day basis, choosing instead to take a "longer, broader point of view." He's also certain that it's better to be a public company, based on the ability to "get money from the public markets rapidly" over being privately owned, despite the retailer's constant financial issues. (Last week, Bloomberg News reported that bets American Apparel's stock will decline, known as short bets, have tripled since June, after what appeared to be a promising first half of 2013. The company hasn't yet disclosed when it will announce fourth-quarter results.)
"We'll see how the company performs over the next five, 10 years," Charney says. "You really couldn't judge Steve Jobs the day he was thrown out of the office, you know? We're at an early stage in our development."
Besides, analysts and journalists have a tendency to be short term in their thinking, he says.
"The stock market is a voting machine and eventually becomes a weighing machine at certain points in the trajectory of a company, and proof comes at the moment of weighing," he explains. "For example, when Facebook went public, they were saying, voting, they're like, 'Bury Mark Zuckerberg! We hate that guy!' But I was watching this morning a little web blurb on one of the finance blogs and they said, 'He is on fire.' And I said, I wish I could just take this video, put it in my pocket, and play it to everyone one year ago. And the same thing happened to Netflix."
While Charney has a point that attitudes toward company stocks and CEOs can be overly nearsighted in a day-trading world, American Apparel's problems aren't exactly new. And while he says he thinks ("though is not certain") the business could hit $1 billion in sales in three to four years, he said the same thing to Businessweek in 2005.
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