The chief executive of American Apparel Inc. has long been known as something of an exhibitionist. Dov Charney is beyond frank when discussing his sex life and sometimes wanders around his factory in his underpants, the Wall Street Journal reports.
Now, American Apparel is opening the kimono — and it’s not necessarily a pretty sight. Since going public last December in an unorthodox maneuver, the company has conceded it suffers a number of “material weaknesses.” According to a filing with the Securities and Exchange Commission, these include “inadequate expertise in the application of U.S. generally accepted accounting principles.” The company is grappling with its fourth sexual-harassment lawsuit, and its former insurer says it won’t pay any damages.
The company says it’s blameless in the suit and that it’s working to correct its other problems. But it also details an unusually long list of risk factors, including a recent query from Immigration and Customs Enforcement requesting citizen documents of factory employees; a current government tax audit and high levels of debt.
Mr. Charney’s penchant for outspokenness could also prove risky. In an interview March 20, Mr. Charney said his current chief financial officer, Ken Cieply, “has no credibility” in the retail apparel industry and is a “complete loser.” Mr. Cieply says: “The only thing I can say is I’m surprised There are times when Dov is frustrated.”
In a followup telephone interview, Mr. Charney Friday called his own words “juvenile.” In a subsequent letter sent via the company’s general counsel, Mr. Charney added: “I do not think Ken Cieply is a ‘loser,’ and if I said anything that led you to believe otherwise, you must have misunderstood me.” Mr. Charney also said in the letter that Mr. Cieply has “enormous credibility” in the manufacturing world, but lacks extensive retail experience.
American Apparel had healthy sales of $387 million last year, up 36% over 2006, and reported a big 37.5% gain in same-store sales in the recently ended first quarter. But its shares are off more than 40% since December. Friday, they closed at $8.30, up 30 cents.
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