American Apparel Case Study

1. From reviewing the American Apparel’s financial statements from 2007 to present, it is clear that the company started declining in 2008. The unfortunate downfall of situations solely originated from Dov Charney, CEO of American Apparel and the “bad” decisions made internally and externally of his company. The financial statements must have been affected by the numerous sexual harassment lawsuits, offensive advertising strategy, and overall negative image the brand has been projecting which made the company lose an adequate amount of money from the business. There was even a case where he used Woody Allen in his ads without Allen’s permission which Charney got sued for and obviously lost to. Miscellaneous activities like those which can be avoided, give a negative impact to the financial statements, especially if there have been more than one case. Charney also had to layoff 1,500 employees because of illegal immigrants working with respectable wages and benefits. This made the company lose key efficiency workers in running their business, of course because of the employee turnover rate, etc. made them lose more money for that certain time period.

2. This company can or should effectively use the 14 million into their operating activities so that they could at least keep their company going and even increase in their sales where it is most needed to keep up with their business. Some suggestions might be to restructure and reevaluate where they are going with their company, especially with their present image they are projecting. To help them bounce back into their regular routine, they should look into a different path in their advertising where they can reach a wider market, less offensive and more appealing for everyone else new or interested in the brand. Also, Charney needs to be on point with the type of clothing or “genre” of clothing since he is trying to change up with American Apparel’s “look”. It’s a very risky time for him to do so, since he still needs to recover but it can also benefit him if his consumers response is positive enough to start a new trend again.

In all honesty though, I think Charney should “clean up his act” and get on point with his overall company image. It is almost as if he has to regain the respect from people who used to be interested in his clothing because he ruined it through his acts and advertising. On top of that, all of the controversy he has caused already with his personal life and company.