American Apparel, its cash situation worsened by a holiday discounting strategy that fizzled, is planning a slowdown at its Los Angeles factory to conserve funds, The Post has learned.
The slowdown could result in “sharply reduced hours and weeks off” for thousands of the company’s garment workers in the coming weeks — and threatens a diminished supply of go-to fashions for the spring season, according to a source briefed on the situation.
Facilities that will likely be affected include the company’s factory in downtown LA — as well as its facilities in nearby Southgate and Garden Grove, sources said.
The likely slowdowns will be another black eye for the company that recently ran up hefty legal bills to oust its founder, CEO Dov Charney.
Ironically, it was Charney who used US manufacturing as a key pillar of the company’s business strategy and brand.
Charney was fired this month after being suspended as chief executive in June on allegations of misconduct that included his allowing a blogger in 2011 to post nude photos of a former employee who was suing the company.
But Standard General, a New York hedge fund that partnered with Charney in July to take control of the company, only to back his ouster in the end, has been vocal about keeping the company’s factory open.
“This is a disaster for a brand that has prided itself as an example of the possibilities of manufacturing in the US,” said one investor close to the company.
Officials at American Apparel and Standard General declined to comment.
While the slowdowns at the factories will save cash, the moves aren’t related to the retailer’s liquidity problems, one source close to the company insisted.
“There might be some reductions in shifts as the company seeks to reduce inventory,” the source said, calling the slowdown “part of a proactive prudent plan to reshape the inventory and ultimately better the in-store selection.”
That theory didn’t fly with others familiar with American Apparel. They said the stores are facing shortages of top-selling styles.
The unsuccessful holiday promotion — called a “dot sale,” which kicked off on Black Friday weekend — not only failed to meet their revenue targets but made the stores look like chaotic discount chains throughout the crucial holiday season, critics noted.
In November, liquidator Great American Group had projected it could generate more than $100 million in incremental sales from the color-coded sale over three months, based on sales of old inventory as well as new.
To date, however, it has sold less than one-tenth of the older inventory earmarked for sale, sources said.
“It looks like a Kmart, not an American Apparel store,” carped one employee. “It looks a bit desperate, like we’re in need of liquidation.”
In a written statement late Monday, American Apparel said its factory was operating in the “ordinary course of business” and that it had a “successful” holiday season.
“Our employees have been working overtime to meet the holiday demand, and now that the holiday season is over, we plan to adjust shift schedules as we do every January,” the company said.