Los Angeles Business Journal

Dov Charney Refuses to Fold

CLOTHING: Founder to start rival to American Apparel? By Daina Beth Solomon Friday, January 29, 2016
Reflecting on Career: American Apparel founder and former Chief Executive Dov Charney on June 18, 2014, his last day in charge of the downtown L.A. clothing maker.

Reflecting on Career: American Apparel founder and former Chief Executive Dov Charney on June 18, 2014, his last day in charge of the downtown L.A. clothing maker. Photo by Courtesy Photo

L.A. plan

According to Hagan, the new venture with Charney, still unnamed, would manufacture clothes in Los Angeles to take advantage of the L.A. and Long Beach ports that can easily ship to Asia. It would also consider selling its creations in department stores rather than just its own shops. Furthermore, Hagan’s firm would partner Charney with “experts” who would steer the company’s growth.

“There are parts of his business that are probably more burdensome to him, that aren’t as exciting and inspirational as other parts,” Hagan said. “We would look to empower the artist.”

Hagan said the new brand would eventually seek to merge with American Apparel and possibly go public. But any growth would be carefully controlled, he said, aiming to avoid American Apparel’s missteps.

“Dov was really young when he founded the company,” Hagan said. The T-shirt brand then exploded in growth as it went from a basement operation to a manufacturer backed by hedge funds.

“We want to limit the shell shock that can go with these major changes, which can distract an individual like Dov who’s been so wrapped up in the company,” said Hagan.

Starting anew might be Charney’s best chance at success, said veteran L.A. investment banker Lloyd Greif.

“What he needs to do is what true entrepreneurs do – dust himself off and get back in the ring,” Greif said. “We’ll see if he has that in him.”

He doubted that Hagan, a firm lacking retail experience, would be an ideal partner. But he said it’s unlikely that many investors would want to team up with someone who lost his job after being accused of misusing company funds and sexually harassing employees.

“He is an entrepreneur with baggage,” Greif said.

A new company would need to be careful to not repeat American Apparel’s mistakes, he added, pointing to the company’s insistence on L.A. manufacturing as its downfall. Under American Apparel’s new leadership, Greif said he expects the company to move at least some of its production to less-expensive cities.

Reinventing himself

Another challenge for Charney would be reinventing himself in the competitive teen apparel market, an industry that rotates the latest fashions on and off store hangers at a breakneck pace.

“If he is creative and has the fashion sense that people have credited him with, he could certainly do it,” said Ira Kalb, an assistant professor of clinical marketing at USC’s Marshall School of Business.

But new designs would have to strongly stand out from American Apparel’s legion of multicolored T-shirts, leggings and dresses.

“When you’re the copy, you’re never as good as the original,” he said.

Bruce Dobb, chief executive of L.A. advisory firm Concerned Capital and who has worked with American Apparel in the past, said he expected the L.A. garment industry to be open to Charney’s latest efforts, especially if they were to generate new jobs.

“There’s always room for new entrants,” he said. “Isn’t L.A. the place where people reinvent themselves all the time?”

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