American Apparel Reports Losses; Charney Files Lawsuits

Retailer American Apparel announced on monday that net losses amounted to $26.4 million in the first three months of the year, compared to a net loss of $5.4 million during the same period in 2014. Sales fell 9 percent to $124.3 million year-over-year. Excluding the year over year impact from foreign exchange and stores closed in 2014, net sales declined 4 per cent from a year earlier quarter.

According to CEO Paula Schneider things "will require time" in what she refers to as "the initial phase of a multi-year strategic turnaround plan" that the company is in. She attributed the decline to discounts given to reduce inventory levels by accelerating the sale of slow-moving inventory, foreign exchange impact and lower retail sales. With a lower payroll from its cost reduction efforts and reduced rent, supplies and miscellaneous activities operating expense for the quarter under review fell slower by 11 per cent from $79.0 million compared to $70.3 million from a year ago quarter.

Since her taking over in January Schneider has since been trying to tone down the sexual content of AA ads, with efforts such as airbrushing the lingerie models' nipples and pubic hair. The company aslo announced that it could sell up to $10 million more shares of common stock to use for capital and general corporate expenses.

Meanwhile controversial founder Dov Charney has sued American Apparel for $30 million in damages for what he claims are "false, defamatory and libellous" accusations, resulting in damage to his reputation, shame and emotional distress.Charney filed a lawsuit against Standard General, which is the hedgefund that controls the retailer's board of directors.

However, AA called the lawsuits "meritless claims" that serve as "public relations opportunities." "Dov Charney, Dov Charney's lawyer and other people related to Dov Charney continue to bring claims that are wrong on the facts and wrong on the law. Each of these claims is rooted in the same exact agenda. These meritless claims serve as public relations opportunities now, but they will fail the test when put before a judge. American Apparel's new management is focused on restoring the financial health of the company and does not intend to waste time addressing each of these meritless claims in the court of public opinion. We are confident we will succeed on every one of these in the proper venue," said the company to Forbes in a statement.