US fashion retailer American Apparel has reported losses in its fourth quarter sales, owing to declining sales and a hefty drop in expenses that cover fees related to last year’s internal investigations of ousted chief and founder Dov Charney.
Charney was fired over alleged misconduct in December but the Securities and Exchange Commission has since opened an investigation with respect to the Suitability Committee’s review relating to Mr. Charney, the clothing company said in a regulatory filing yesterday. The teen fashion retailer said it intends to fully cooperate with the SEC, adding that the investigation is a “non-public, fact-finding inquiry” which will determine whether any violation of law has occurred.
The Los Angeles based company cited that it spent $10.4m on its internal investigation of Charney in 2014 and another $7m on employment settlements and severance payments.
Although American Apparel said in the filing that it will be able to meet its financial commitments for the next 12 months, those are mammoth figures given that the retailer had only $8.3m in cash as of 31 Dec. It also reported that sales for the year tumbled 4% to $609m.
American Apparel has not turned a profit since 2009. Over the last six years, net income has been impacted by poor sales, problems with a new distribution center as well as those legal expenses concerning Charney’s exit.
His replacement came in the form of Paula Schneider, a veteran fashion executive, who was appointed as Chief Executive in January and has ambitious plans. Speaking on American Apparel, Schneider said in January:
“’This is an edgy brand and it’s always going to be an edgy brand, and it’s about social commentary, it’s about gay rights, and it’s about immigration reform. It’s about the things millennials care about.”
Net sales for the quarter through the end of December fell 9% compared with a year earlier, to $153m, as both retail and wholesale sales tumbled, the retailer said in a statement.