American Apparel

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American Apparel, Inc.
Type Public (AMEX: APP)
Founded Los Angeles, California
Headquarters Los Angeles, California
Key people Dov Charney, President and CEO
Marty Bailey, President of Manufacturing
William T. Gochnauer, Interim CFO
Nicolle Gabbay, Head of Retail Operations
Patricia Honda, Customer Service Manager[1]
Industry Garments manufacturer
Products Clothing
Revenue US$387 million (net sales, 2007)[2]
Employees 6700 (2007)
Website www.americanapparel.net

American Apparel (AMEX: APP) is the largest clothing manufacturer in the United States. It is a vertically-integrated clothing manufacturer, wholesaler, and retailer that also performs its own design, advertising, and marketing. It is best-known for making basic cotton knitwear such as t-shirts and underwear, but in recent years has expanded to include tank tops, dresses, pants, denim and accessories for men, women, children, babies and dogs. The company is known for a number of progressive policies including promoting immigrant rights and labor policies the company dubs "sweatshop free."[3]

Contents

[edit] Company formation and growth

Shopper at a Los Angeles store
Shopper at a Los Angeles store

In 1997, company founder and CEO Dov Charney, who had run several related clothing enterprises, transitioned his manufacturing to Los Angeles and began to sub-contract sewing with SamLim who, at the time, had a shop with 50 workers under the Interstate 10 freeway in Los Angeles. Months later the two became partners.[4] In 2000 American Apparel moved into its current factory in downtown Los Angeles. The company also operates a dye house and knitting facility located in Los Angeles.[5]

After its success as a wholesale brand, the company moved into the retail market. The company was ranked 308th in Inc. Magazine's 2005 list of the 500 fastest growing companies in the United States, with a 440% three-year growth and revenues in 2005 of over US$ 211 million.[6]

In late 2006 American Apparel announced a reverse merger, in which Endeavor Acquisition Corp., a special purpose acquisition company founded in July 2005, bought the company for $360 million.[7][8] The merger closed in December 2007, at which point American Apparel became a publicly traded company.[9] As a result, Charney became the President and Chief Executive Officer of the publicly traded company known as American Apparel, Inc. He remained the majority shareholder, and all employees of American Apparel were given 500 shares of stock in the new company.[10][11]

[edit] Retail

Retail storefront
Retail storefront

The company's expansion into retail was the fastest retail roll out in American history.[12] In 2003 American Apparel opened company stores in Los Angeles, Montreal, and New York to nearly $80 million dollars in sales[13] As of 2007 the company has more than 185 stores worldwide and continues rapid retail growth, with new stores in the United States, Israel, Japan, Korea, Netherlands, Switzerland, Germany, Canada, France, Sweden, Mexico and the United Kingdom. Stores are planned or under development for Australia, Belgium, Italy, Spain, [14], China[15], and Hawaii.[16]

American Apparel retail stores are marketed and designed individually rather than homogeneously.[17] Store designs are sparse and typically cost between $100,000 and $400,000 to develop.[17] The company tends to reject midtown, high rent locations and generally avoids in-mall stores.[17] The stores are often hubs for urban renewal since the company looks for low-rent but high traffic locations like Houston, Little Tokyo, New Orleans and many college towns.[17] When scouting for locations, it considers urban areas that can be revitalized.[18] After opening on Southwest Stark Street in Portland, Oregon American Apparel was joined by a vintage clothing store, sushi restaurant, shoe shop and modern-styled hotel.[18] In some cases, the company sublets parts of retail locations to other businesses of the same demographic, bringing additional retailers to previously unoccupied space.[18] The bulk of American Apparel retail venues are in New York and California.[17]

AmericanApparelStore.com is the company's e-commerce sales hub.[19] It carries an online inventory of roughly 250,000 SKUs and receives 1.5 million visitors per month.[20] Online sales grew from $13.3 million in 2006 to $29.3 million in 2007.[20] The company site runs on the Yahoo Stores platform and is included in the Internet Retailer 500 Index.[20][21]

In late 2007, American Apparel opened a retail location for vintage clothing called California Vintage in Echo Park, a district of Los Angeles.[22] In 2008, the company was named "Retailer of the Year", following Calvin Klein and Oscar de la Renta.[23][24]

[edit] Production

American Apparel's headquarters and factory in Los Angeles
American Apparel's headquarters and factory in Los Angeles

Whereas most other companies selling clothing in the United States base production elsewhere, American Apparel bases its manufacturing in an 800,000 square foot factory in downtown Los Angeles, California.The company also operates its own fabric dye house, garment dye house, and knitting facility, all based in Los Angeles.[25] American Apparel has decided not to outsource its labor, paying its factory workers an average of $12 dollars an hour.[3] Garment workers for similar American companies in China, earn approximately 40 cents per hour.[26]

The company uses "team manufacturing" which pools the strongest workers towards priority orders.[27] After its implementation, garment production tripled and required a less than 20% staff increases.[27] The factory claims to have the capacity to produce 1 million shirts per week.[28][29] According to the New York Times it is the largest single garment factory in the United States.[14]

[edit] Vertical Integration

American Apparel is a vertically-integrated company.[30] The integration extends to 185 retail storefronts, all of which are owned by the company.[31] By integrating all aspects of production and avoiding outsourcing, the company achieves a fast turn-around time from design concept to finished product.[5] On Charlie Rose, founder Dov Charney discussed the process of developing new merchandise in their unique retail system, saying that it took just a "couple of weeks" for a bathing suit to go from idea to the retail floor. He claimed that a garment could be designed on Monday and be sold in London the following week.[32][33]

[edit] Branding and advertising

American Apparel is known for its provocative and controversial advertising campaigns, which is largely the inspiration of the company CEO Dov Charney. For a time, Charney promoted a branding strategy that spotlighted his treatment of workers as a selling point for the company's merchandise, promoting American Apparel's goods as "sweatshop free." In 2008, the company took out a series of political ads featuring the corporate logo that called current immigration laws an "apartheid system."[34]

The company's advertising is also known for its sexuality. Many of the models are recruited by Charney and his colleagues on the street, or company stores; others are selected after sending their photos directly to the company website.[14]

In 2005 the company was named "Marketer of the Year" at the first-ever LA Fashion Awards.[35] Women's Wear Daily published a survey in April 2007 from Outlaw Consulting, a creative research firm tracking the habits of 21-to 27-year olds, which ranked American Apparel as the 8th most trusted brand, ahead of such clothing brands as H&M and Levi's.[36] In January 2008 the Intelligence Group, a trend and market research firm, listed American Apparel as their number two Top Trendsetting Brand, behind only Nike.[37].

On March 31, 2008, Woody Allen announced that he was suing American Apparel for $10 million in damages for featuring a still from the movie Annie Hall in a company advertisement.[38] American Apparel claimed that the two billboards, one in New York and one in Los Angeles for a week in May 2007, were meant "strictly as social parody."[38] Allen’s lawsuit states that he did not consent to use of his image and did not agree to endorse American Apparel[39]

American Apparel shirts are used as band merchandise and concert t-shirts for the bands Wilco, Death Cab for Cutie and Flogging Molly.[40]

[edit] Airbrushing

The sexually charged advertising has been criticized, but has also been lauded for honesty and lack of airbrushing.[41][42] American Apparel images often display subjects with their blemishes, imperfections and asymmetrical features highlighted and attached with brief, personal descriptions.[14] According to company policy all ads inside American Apparel stores excluding art exhibits, are untouched.[43]

[edit] Virtual Advertising in Second Life

Inside of American Apparel's Second Life Store
Inside of American Apparel's Second Life Store

In the summer of 2006 American Apparel paid to design a virtual store on the private island named Lerappa ("Apparel" spelled backwards) in Second Life. [44] The two story building was modeled after American Apparel’s Tokyo showroom which occupied 6,000 square feet.[45] American Apparel closed its virtual shop in the fourth quarter of 2007.[46]

[edit] Corporate Culture and Employment

The production system of American Apparel centralizes most of its employees in a single location. By not outsourcing, Charney claims that he knows his workers better and that it ties them directly to the brand.[47] A banner on top of the downtown factory states "American Apparel is an Industrial Revolution." [48]

Charney has stated that American Apparel hires its creatives by their sense of culture and fashion, not their resume.[49] Conversely, the company has also been accused of focusing on personal style and outward appearance in its hiring practices for retail positions.[50] American Apparel has been subject to four sexual harassment lawsuits, three were dismissed or settled.[51] The fourth was appealed and remanded to arbitration.[52] In a video posted on the company website, Charney walked across his factory floor modeling a pair of men's briefs for his employees.[53]

According to Charney, the unconventional corporate culture at American Apparel is responsible for the company's creativity and rapid growth.[54]

[edit] Labor

Legalize LA banner displayed at company headquarters
Legalize LA banner displayed at company headquarters

As of 2007 the company employs over 6,700 people and operates over 180 retail locations in 13 countries.[55] The company pays its manufacturing employees an average of US$12 per hour[3]. According to the San Francisco Chronicle the average factory worker at the company makes $80-120 dollars per day, or roughly $500 per week compared to the $30-40 made daily at most other Los Angeles-based garment factories.[56] Employees also receive benefits such as paid time off, healthcare, company-subsidized lunches, bus passes, free ESL classes, on-site masseurs, free bicycles and on-site bike mechanics, free parking, and proper lighting and ventilation.[57]. The company's employees in foreign countries do not receive the same hourly wages as their Los Angeles counterparts.[15] However, employees in China, will earn US Federal minimum wage.[15] After going public, the company offered employees as much as $40 million in stock shares.[16] The plan grants employees roughly 1 share of stock for every workday they'd spent at the company.[58] Approximately, 4,000 of the company's employees are eligible for the program.[58] The waiting list for employment at American Apparel has over 2,000 names on it.[59]

The company's employees are not unionized. In 2003, the UNITE launched a union drive at the factory.[60][61] American Apparel countered that the union was "trying to politically force American Apparel into embracing it, regardless of worker interest."[62] In a letter to The Nation, Charney claimed that workers organized a grassroots protest of the union demonstration itself and used it as evidence of the union's unpopularity.[62] The organization reported American Apparel to the National Labor Relations Board for interference with the drive.[63] However, American Apparel was not charged as a result of the claims.[64] As part of the settlement, the company posted document stating that it would not interfere would worker's rights to unionize.[65]

[edit] Support for immigration reform

As early as 2001, American Apparel has been a vocal advocate for reform of U.S. immigration laws. [66] On May 1, 2002 American Apparel shut down its factory to allow the company's workers, many of whom are immigrants, to participate in a pro-immigration rally in downtown Los Angeles. Dov Charney, a Canadian immigrant, also marched alongside the workers.[67] In addition to participating in this and a variety of subsequent immigration protests, the company has run a series of "Legalize LA" ads and billboards.[68] American Apparel participates annually in the May 1st Immigration March and Rally in downtown Los Angeles. In 2008, they added a route from their factory that eventually connected with other supporters near the city hall.[69]

[edit] Environmental policies

Solar panels on the roof of American Apparel's downtown factory
Solar panels on the roof of American Apparel's downtown factory

The company promotes environmentally friendly practices.[70] As of 2007 the company planned to increase its use of organic cotton within the next four years from over 20% to 80%. American Apparel also sells a line of shirts under the "Sustainable" label that are 100% USDA organic cotton.[71][72] It installed a 146 kilowatt solar electric system on its factory roof, designed to reduce power costs by at least 20%.[73] The company also recycles its fabric scraps.[74] and maintains a bicycle lending program for its employees.[75] According to PETA it is a vegan-friendly clothing company.[76]

[edit] Philanthropy

In 2005, the company hosted a bikini car wash benefit with the American Red Cross to raise money for the victims of Hurricane Katrina.[77][78] Two employees of the company packaged and delivered 80,000 shirts to the relief effort.[79] As an underwriter of Farm Aid, American Apparel donates the blank shirts that the organization prints and sells as merchandise.[80][81]

[edit] References

  1. ^ Company Information. American Apparel. Retrieved on 2008-03-18.
  2. ^ "American Apparel Reports Fourth Quarter and Full Year 2007 Financial Results", Business Wire (American Apparel press release), March 17. Retrieved on 2008-03-18. 
  3. ^ a b c New York Post - T-Shirts, As Far As the Eye Can See - Maxine Shen - March 24, 2004
  4. ^ Apparel News -Angeleno Style - Alison A. Niedler - August 2000
  5. ^ a b Segment of Modern Marvels: Cotton. The History Channel via AmericanApparel.net. Retrieved on 2007-11-25.
  6. ^ Inc. No. 308:American Apparel. inc.com (2006-08-01). Retrieved on 2007-11-25.
  7. ^ American Apparel's unusual flotation is typical of Dov Charney, its founder. The Economist via AmericanApparel.net (2007-01-04). Retrieved on 2007-11-25.
  8. ^ Andrew Ross Sorkin and Michael Barbaro. "Provocative Retail Chain Is Acquired", New York Times, December 19, 2006. Retrieved on 2008-03-12. 
  9. ^ American Stock Exchange Announces Closing of Endeavor Acquisition and American Apparel Merger[1]
  10. ^ Endeavour Acquisitions Corp. SEC Proxy Statement Schedule 14A, June 5, 2007
  11. ^ Kang, Stephanie. "American Apparel Seeks Growth Through An Unusual Deal", The Wall Street Journal, December 19, 2006. Retrieved on 2008-03-21. 
  12. ^ Dov Charney. (2007). American Apparel - Don Charney Interview [YouTube]. CBS News."fastest retail roll out in American history"
  13. ^ DNR - All the Way to the Blank - Lee Bailey - March 22, 2004
  14. ^ a b c d Jamie Wolf (2006-04-23). And You Thought Abercrombie & Fitch Was Pushing It?. New York Times Magazine. Retrieved on 2007-11-25.
  15. ^ a b c Harmon, Andrew. "American Apparel Expands To China", DNR, March 17th, 2008. Retrieved on 2008-04-07.  "[Wages] will not be the same as the L.A. workers, but we will make sure that every worker in China receives at least a U.S. federal minimum wage per hour worked,” Charney said."
  16. ^ a b Wu, Nina. "American Apparel opening store in Waikiki", Star Bulletin. Retrieved on 2008-04-01. 
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  18. ^ a b c Eskenazi, Stuart. "[www.portlandtenspeed.com/pdfs/The%20Seattle%20Times.pdf Hot Retailer...]", The Seattle Times, October 22, 2005. Retrieved on 2008-04-28.  "In a few instances..."
  19. ^ [http://www.americanapparelstore.com www.americanapparelstore.com
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  21. ^ [2] Internet Retailer Top 500 Guide] 2008.
  22. ^ On Our Radar: American Apparel Does Vintage. Fabsugarl. Retrieved on 2008-03-28.
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  24. ^ Fashionista: Dov Charney, Winner "Dov Charney was just named Retailer of the Year for his work as the Creative Director and entrepreneur behind American Apparel. The award's previously gone to Calvin Klein and Oscar de la Renta.
  25. ^ True colors: some dyeing operations thrive, others fail - Los Angeles Business Journal - October 10, 2005[3]
  26. ^ Good Luck Competing Against Chinese Labor Costs Mfg. Job Growth In China Is Headed Up, Not Down; 109 Million Mfg. Workers In China Dwarfs Number In U.S.. Manufacturing and Technology News (2006-05-02). Retrieved on 2008-04-28.
  27. ^ a b Falsh, Derek. "Keep Your Fashion in Great Shape", The Pitt News, February 1st 2007. Retrieved on 2008-04-28.  "His team manufacturing..."
  28. ^ AMERICAN APPAREL, INC - APP Current report filing (8-K) "Capacity to produce over 1 million T-shirts per week with significant potential to expand."
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  34. ^ Story, Louise. "Politics Wrapped in a Clothing Ad", ABC New, Jan 18, 2008. Retrieved on 2008-03-25. 
  35. ^ Grace Cerrone - lasplash.com - LA Fashion Awards - 2005 [4]
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  37. ^ Cassandra Report. Intelligence Group (2008-01).
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  39. ^ "Woody Allen Sues Over NY Billboard". Associated Press (2008-03-31). Retrieved on 2008-04-02..
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  42. ^ Morford, Mark. "Porn Stars in My Underwear", San Francisco Chronicle, June 24, 2005. Retrieved on 2008-03-21. 
  43. ^ Goodwin, Susan. "An American Dilemma", Oregon Daily Emerald, January 18, 2006. Retrieved on 2008-04-23. 
  44. ^ American Apparel Breaks New Ground. Linden Research, Inc. Retrieved on 2008-04-28.
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  46. ^ Sorry, We're Closed.. American Apparel Inc (2007-02-27). Retrieved on 2008-04-28.
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  48. ^ Dov Charney. (2007). American Apparel - Don Charney Interview [YouTube]. CBS News.@8:13
  49. ^ Dov Charney. (2006). Charlie Rose [YouTube]. PBS. 32:00
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  51. ^ Hall, Caral. "Lawsuit has fashion mogul in spotlight", Los Angeles Times, 17 January 2008. Retrieved on 2008-03-28.  "The case is the fourth against him alleging sexual harassment. One was dismissed. Two others were combined and settled. He has denied the charges in all of them."
  52. ^ Brennan, Margaret. "American Apparel's Dov Charney: An Update", CNBC, March 6th, 2008. Retrieved on 2008-03-28. 
  53. ^ Dateline NBC Josh Mankiewicz, "Sexy Marketing or Sexual Harassment?", NBC Television 7/26/06
  54. ^ Carmichael, Evan. Lesson #3: Conventions Are Not For The Creative Entrepreneur. EvanCarmichael.com. Retrieved on 2008-03-28. “We plan to continue to behave in a contrarian matter,” Charney says. “This creative environment is what got us to this point. We certainly aren’t going to stop doing it now after we created a highly profitable company.”
  55. ^ American Apparel to report Q4 2007 financial results. Fibre 2 Fashion (March 17, 2008). Retrieved on 2008-04-05.
  56. ^ Strasburg, Jenny. "Made in the U.S.A", San Francisco Chronicle, July 04, 2004. Retrieved on 2008-03-27.  "At American Apparel, he says that he works 7:45 a.m. to 4 p.m. most days, with a lunch break, and makes anywhere from $80 to $120 per day. ...rarely earned more than $30 or $40 a day at other factories. ...Its sewing-machine operators commonly make more than $500 a week..."
  57. ^ Linda Baker (2004-02-11). Made in the U.S. of A.?. Salon.com. Retrieved on 2007-11-25.
  58. ^ a b "American Apparel Announces Further Details of $39 Million Employee Stock Grant", Business Week, Jan 3, 2008. Retrieved on 2008-04-07.  "This equates to roughly one share of stock for each workday."
  59. ^ Bell, Michele. "Dov Charney: Rebel With A Cause", The Counnselor, August 2004. Retrieved on 2008-03-29. "There's a waiting list 2,000 names strong to work at American Apparel."
  60. ^ Apparel News - Influential in 2002 - December 2002
  61. ^ Ari Paul (2005-08-04). Wolf in Sheeps Clothing. In These Times. Retrieved on 2007-12-19.
  62. ^ a b Charney, Dov. "Letters: American Apparel & United", The Nation. Retrieved on 2008-03-26. 
  63. ^ Stephen Wishart. Behindthelabel.org (January 2005) The Truth Behind American Apparel: Sweatshop free or Union buster?
  64. ^ Ari Paul (2005-08-04). Wolf in Sheeps Clothing. In These Times. Retrieved on 2008-04-05.
  65. ^ Ari Paul (2005-08-04). Wolf in Sheeps Clothing. In These Times. Retrieved on 2008-04-05. "As part of a no-contest settlement, the company voluntarily posted a notice informing workers that it would not interfere with their rights to organize."
  66. ^ Louise Story - The New York Times - January 18, 2008[5]
  67. ^ May 1,March for Workers Rights - 05_2002
  68. ^ The May Day Marches - Claire Hoffman - The Los Angeles Times - 2006-05-02 "The iconoclastic chief executive of American Apparel Inc. not only gave 3,300 of his employees the day off, but he also supplied them with T-shirts emblazoned with a pro-immigration message," "By noon, Charney had left the factory and joined his workers and their families, who had arranged to march together on Broadway," "American Apparel, with about 130 stores around the world, has a history of supporting May Day marches: In past years, employees were given half the day off and bused to protests.
  69. ^ American Apparel Homepage: Legalize LA
  70. ^ PSFK - Piers Fawkes - October 4, 2007 "Why Build Sustainability Into Your Business?".
  71. ^ American Apparel Organics: Sustainable Edition, <http://www.americanapparelorganics.com/indexContent.html>. Retrieved on 24 March 2008 
  72. ^ Sustainable Edition Organic Fine Jersey Short Sleeve T-Shirt, <http://store.americanapparel.net/2001org.html#i>. Retrieved on 24 March 2008 
  73. ^ RenewableEnergyaccess.com (January 27, 2006).Downtown L.A. Clothing Company Goes Solar
  74. ^ Josh Sims, "Organic Consumers Association" (July 6, 2006). Look Good, Save the Earth
  75. ^ "American Apparel bicycle program provides healthy benefits to employees and environment.", Wearables Business, April 4, 2004. Retrieved on 2008-03-24. 
  76. ^ {{{author}}}, Animal-Friendly Fashion Retailer, Cosmetics Maker Capture Youth Vote on peta2.com, PETA, Nov. 30. 2006.
  77. ^ Hall, Steve, Bikini Car Wash Raises Money For Katrina, <http://www.adrants.com/2005/10/bikini-car-wash-raises-money-for-katrina.php>. Retrieved on 2008-03-36 
  78. ^ WireImage: Pictures from American Apparel Carwash
  79. ^ "Delivering the Good -- News", Los Angeles Garment and Citizen, October 12, 2005. Retrieved on 2008-03-26. 
  80. ^ Farm Aid: Merchandise Description
  81. ^ Grossberg  , Josh. "Farm Aid Gets Polka On", E! News, Aug 31, 2006. Retrieved on 2008-03-26. 

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