© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
June 24, 2014 3:50 pm
As his blacked-out Cadillac Escalade streaks along a steamy Manhattan avenue, Dov Charney’s eyes are glistening with tears.
The 45-year-old founder of American Apparel, fired last week from his roles as chairman and chief executive of the struggling US fashion chain after allegations of financial mismanagement and sexual harassment, is reading aloud a series of text messages from loyal workers.
“I will always support you Dov; the passion and affection I feel for the company and everyone I work with is largely down to you. You can fight back from this,” he whispers, before scrolling to another message and pausing for breath.
“Do what you have taught us. We love you and are all the energy you need to have now. We will fight too.”
Mr Charney says he has received over 100 similar supportive messages in the six days since his contract was abruptly terminated by American Apparel’s board.
Despite a reputation for courting controversy with his behaviour in the company back rooms, he insists the boardroom coup took him completely by surprise. It comes just months after he had agreed to halve his stake to 27 per cent and ended with his dismissal following a nine-hour stalemate after he refused to take a back seat consultancy role with a salary of $1m per year.
Mr Charney called the board’s move “exploitative of my dignity.”
Now, if he cannot find a way back to the top of the company he founded in 1989 on a “Made in the USA” promise and a cool, sexed-up aesthetic, Mr Charney says his lawyers think he has grounds to claim between $23m and $25m for wrongful dismissal.
“Like most great entrepreneurs, Dov is a dreamer,” said Allan Mayer, co-chair of American Apparel. “The fact is, he wasn’t wrongfully dismissed. But had we chosen to terminate him without cause, which we easily could have done, his entitlement would have been a small fraction of what he suggests.”
But money seems not to be what is driving Mr Charney – and it appears he is unwilling to go without a fight.
“I am the best man for this job,” he says defiantly, adding that his ousting is thwarting his attempted turnround of the company, which has struggled to combat stagnant sales and is laden with $250m debt. American Apparel had a brush with bankruptcy in 2011 and reported a $5.5m net loss and a 7 per cent drop in same-store sales in the first quarter of this year.
“Recent years have been tough and we’ve gone through a number of challenges – liquidity has been very stretched and perhaps I expanded our store base a little too rapidly back in 2006,” he concedes.
“But if I were back in the office tomorrow, I would continue my efforts to reduce inventory – within the year I could get it down another 10 per cent. Last year we cut it by about 16 per cent. This has been our best year since 2009, it is a turnround year and it’s reflected in the numbers.”
As the car picks its way through clogged side streets, Mr Charney’s manner gains intensity and pace.
“We are a $650m annual revenue business. We should – and can – make more money on the existing sales base we have, then leverage up profitability from there . . . I know I can drive up sales because I’ve been doing it. In the first quarter of this year, for example, we have had record sales thus far in wholesale.”
Mr Charney says that he took big steps during the past year to maximise the efficiency of the business when others would not, such as auditing expenses and overseeing the management of a costly and inefficient distribution centre that, after opening last year, quickly caused the company to haemorrhage cash.
“I opposed that centre from the off. But when things went wrong, following a decision that was made despite my reservations, I moved into that facility. I had a shower built, I was there 20 hours a day for three full months. I was there on the ground, not the board and certainly not a cabal of consultants.”
Many of the accusations from the board and external consultants that supported Mr Charney’s termination have been around for years: pay-offs to former employees; the misuse of company money for personal use; alleged sexual misconduct. None has resulted in court findings against Mr Charney.
“It’s sad to me that the board are invoking sexual shame in a false way to advance their agenda. Its almost like mocking someone’s sexual orientation in order to advance themselves,” he says as the car slows beside an apartment block on the far western reaches of midtown.
“American Apparel is about vision, passion, intensity, brand-free, sustainability, fair wages, solar power, recycling, creativity and the can-do spirit,” he adds, barely pausing for breath. “It’s about contrarian thinking winning out over the conventional.”
Despite the endless amounts of trouble and resentment this philosophy and subsequent behaviour has brought to him in years past, Mr Charney has, on the spur of the moment, invited me to one of the corporate apartments at the heart of the scandal. His termination letter accused him of misusing corporate assets, such as property.
Up rickety stairs is a deeply unluxurious studio. Mr Charney calls it the “war room”.
A few mattresses, sheets tangled, lie on the floor. There are low-rise sofas, a computer and printer and, pinned to the walls, shoot shots and negatives from one of the company’s many racy advertising campaigns.
“You’ve now seen our corporate apartment in Manhattan – you’ve seen the truth when they accuse me of misuse of funds,” Mr Charney says, taking a seat with a faintly dejected air. The near maniacal energy that propelled him earlier in the interview has faded somewhat.
“I believe the allegations that they have made against me in my termination letter to be entirely false. Many of the things in the letter that they portray as negative are in fact actually best practices.”
Soon after we arrive, we are off again, on a hunt for a notary regarding documents he needs to sign. His delicate, diminutive figure, clad in white plimsolls, a checkered shirt and Aviator sunglasses, blends unnoticed into the crowd – but his spirits brighten considerably as he sees some of his pieces worn by passers-by.
“I am a deep part of the brand. My team and I have worked decades to shape and design the aesthetic. What’s more, I’ve been doing the right things and have handpicked the team currently in place – bar perhaps the CFO and some of his associates,” he concludes triumphantly, his steps gaining pace.
Whether it’s bravado or just bluster, at no point does he cede ground in this highly public battle for control, obliquely batting away questions regarding both American Apparel’s rocky financials and past sexual allegations against him.
It is almost as if Mr Charney believes that the scandalous behaviour he has so often been accused of is inextricably tied up with the image of his often lauded but deeply unconventional fashion label.
“I may not be married, or have grey hair, or embody the conventional characteristics of an executive board. But whether I fit that template or not, I know I have been turning this company around, and am on the right track.”
Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.
Sign up for email briefings to stay up to date on topics you are interested in