JUNE 26, 2017 · By Daphne Howland

(Credit: Dov Charney)

Dov Charney has one hell of a story to tell. After losing American Apparel in a death spiral of debt, corporate intrigue and troubling sexual harassment allegations, Charney is starting over with a new venture that sounds a lot like his old one. But can he really build a new and improved American Apparel — and escape his past? In the months after American Apparel was sold out of bankruptcy and its stores were shuttered worldwide, Charney spoke at considerable length with Retail Dive about his complicated history, the road ahead — and everything in between.

Prologue Dov Charney has a proposition. “Do you wanna FaceTime?” The reporter he’s talking to this morning has just a few follow-up questions, but Charney has something more exciting in mind. As the video call fires up, he shows off his Los Angeles living space — the walls filled with taped-up papers, his clothes folded onto an Ikea bookshelf. Charney’s signature mutton chops and 80s-style aviator eyewear are nowhere to be seen. His dark hair and scant beard are flecked with grey. He’s smiling — grinning, really. There’s a fervor. Then Charney gets to what he really wants to show… and for anyone thinking about the American Apparel founder’s checkered reputation, don’t worry: it’s more captivating — not to mention more wholesome — than you might think. It turns out the bedroom is little more than a bivouac. It’s set up so that Charney can spend days and nights in this building. The real action is beyond the bedroom door, which opens onto a vast, light-filled space where massive, state-of-the-art machines hum with activity. The realization quickly sets in: This is a garment factory — specifically, it’s the home of Los Angeles Apparel, Charney’s new venture. “This is from Europe. It’s the best,” Charney says of one machine, navigating among the workers moving across the factory floor. “A lot of these people I know, they worked for me at American Apparel.” He approaches several workers. “Cuantos años en American Apparel?” “Nueve,” one responds. “Seven,” says another, followed by, “Twelve.” One man flashes his palms twice, then makes the number-one sign with his index finger: “Twenty-one.” Timeline (1989-2017) Dov Charney starts American Apparel

American Apparel begins manufacturing in Los Angeles

First retail stores open

Former employees file three sexual harassment lawsuits against Charney

American Apparel goes public

Immigration agents investigate American Apparel

The company receives bankruptcy waivers and installs John Luttrell to oversee its finances Five former employees sue Charney amid claims of sexual assault

The company's board ousts Charney as CEO and brings in Paula Schneider

American Apparel files for Chapter 11 bankruptcy for the first time Charney makes a $300 million bid for control of the company, which is rejected

American Apparel emerges from bankruptcy as a private company Charney starts a new venture called Los Angeles Apparel Schneider leaves American Apparel The company files for bankruptcy for a second time

Gildan Activewear buys American Apparel’s intellectual property for $88 million American Apparel shutters its Los Angeles factory and retail stores worldwide American Apparel, of course, is the apparel company Charney founded almost 30 years ago as a young Canadian carried away by a lifelong obsession with American-made cotton T-shirts. The company whose fledgling wholesale business he transformed into a trendsetting fashion brand and global retail empire with hundreds of millions of dollars in annual sales. The company that prided itself on its immigrant labor, domestic manufacturing and good wages. But it was also the company whose sexually charged marketing — not to mention its CEO’s personal behavior — polarized the very public it wanted to buy its product. The company whose Shakespearean rise and fall became one of the biggest business stories for over a decade. The company that ultimately ousted Charney in 2014 amid accusations of financial improprieties and sexual harassment. And, ultimately, the company he watched stumble, fall into the ether and become just a shell of its former self — a brand in name only, its U.S. manufacturing base and retail stores effectively abandoned after Canadian T-shirt maker Gildan acquired the company at a January 2017 bankruptcy auction for a mere $88 million. American Apparel is far from the only company to succumb to the mounting pressures facing so many apparel retailers, especially in recent months. The Limited, Wet Seal and BCBG Max Azria all fell victim to changing consumer tastes and shopping patterns in the first quarter of 2017 alone. But American Apparel stands out. For nearly 30 years, the company provided a steady stream of high-quality basics and edgy styles to worldly urbanites who had no use for the logo-laden clothes favored by suburban teens. Charney’s unique approaches to fashion, manufacturing, marketing and retail drove the brand's rapid ascent to the top of the apparel world in the mid-2000s. The company eventually crumbled in spectacular fashion under the growing pressures of its precipitous rise, accelerated by the Great Recession and its own rather peculiar set of problems. And one cannot escape Charney's personal troubles when talking about American Apparel's downfall. Several ex-employees filed lawsuits over the years accusing him of sexual assault and harassment — lurid and disturbing accusations that would eventually underpin his removal as CEO. The real story of who is to blame for American Apparel’s downfall — and whether there's truth to the allegations against Charney — played out in a rather public tug of war. While the company's management disparaged his behavior in the press and in courtrooms, Charney has always sought to be the master of his own narrative. He denies the accusations outright and insists they were merely a pretense for his ouster, noting the company’s board acted on them long after they were news. At the time of his firing, Charney believes, American Apparel was poised for a comeback; he just never got the chance to make it happen. American Apparel ultimately unraveled without him — and a dark cloud still lingers over his reputation. [Los Angeles] is not the America that Donald Trump has in mind. This is the America that the Rainbow Coalition had in mind. Dov Charney Now Charney’s starting over. He has a new venture — Los Angeles Apparel. At first blush, the company continues right where American Apparel left off. Charney’s essential approach remains unchanged, and he maintains the same unwavering confidence that young urbanites represent a niche market that will translate into hundreds of millions in apparel sales. But even the name of the company hints at some differences. “America” is now Donald Trump’s America — and for Charney, “Los Angeles” is an antidote to that: A diverse city of strivers and the birthplace of the gritty style that won Charney over decades ago. “Los Angeles is one of the most exciting places in the country for manufacturing, for culture, and despite the higher costs, it’s doing fantastic,” says Charney. “This is not the America that Donald Trump has in mind. This is the America that the Rainbow Coalition had in mind.” With American Apparel now firmly in his rearview mirror, Charney’s future holds possibilities. But can he build a new and improved American Apparel — and escape his past?

Oh, Canada! It’s not called American Apparel because it was made in America, says Dov’s father, Morris Charney. “It was called American Apparel because he was in Canada, and he really liked American cotton and the American T-shirt and the quality of the fabric.” (Credit: Dov Charney)

I. The Rise (1989-2008) The Early Days Dov Charney’s determination to move on from American Apparel by creating a new company that closely resembles it speaks to the preternatural determination that sometimes vexed his parents and teachers when he was just a small boy in Canada. “Dov — he was a handful,” his father Morris Charney tells Retail Dive. “They didn't understand him at school, but he had an entrepreneurial spirit. Dov was persistent.” That spirit got him in trouble at an early age. Inspired by The Montreal Star, which he delivered in the mornings, 11-year-old Dov established a newspaper, the “What’s Up Newsletter,” assigning his friends stories to write and printing copies in the Charney family basement. The kids sold the papers lemonade stand-style, but Charney’s school accused him of encouraging them to panhandle. A few years later, Charney became obsessed with the superior feel of American cotton T-shirts. While attending elite Connecticut boarding school Choate Rosemary Hall and later Massachusetts’ Tufts University, he would bring carloads of American-made merchandise home to Montreal and sell items on the street, at one point earning a $25 fine for bootlegging. But buying T-shirts at stateside Kmart stores and driving them across the border wasn’t exactly an enduring business enterprise. So Charney quit school, borrowed $10,000 from his parents and established American Apparel in South Carolina in 1989, exploiting his next-level geekery about fine-gauge jersey and baby rib shirts to produce his own line with the aid of facilities and workers from Hanes Brands. “It wasn't called ‘American Apparel’ because he was manufacturing in Los Angeles or in South Carolina — not at all,” Morris recalls. “He started in the basement of my home. And it was called American Apparel because he was in Canada, and he really liked American cotton and the American T-shirt and the quality of the fabric.” During American Apparel’s formative years, Charney’s manufacturing depended on contracts with South Carolina factories. He speaks fondly of his years in the American South, and credits local mentors for shaping his business acumen. But Los Angeles beckoned even then. As the 1990s unfolded, Charney established an increasing number of West Coast contracts while South Carolina’s manufacturing sector waned. After continuing to manufacture on both coasts for a while, Charney finally embraced American Apparel’s destiny, trucking seven loads of raw materials and inventory west — a move completed in October 1997. Despite steeper costs like higher wages — outside the area’s notorious sweatshops, that is — and more stringent break and sick leave rules, Southern California fit Charney perfectly with its temperate climate and intemperate culture. Los Angeles’ Korean garment community was “vigorously supportive” of his ambitions. “Many suppliers extended me credit even after I bounced so many checks on them and continuously failed to pay them on time,” Charney wrote in his online autobiography in 2014. He quickly came to appreciate the willingness of Korean-American garment factories to produce smaller runs, an approach that has become key to his idea of “rapid reaction” manufacturing — a process he believes is critical now more than ever to respond to what’s selling in the market and ensure quality control. “It’s rapid reaction, it's rapid production to react to trends, not fast fashion,” he says in a conversation with Retail Dive. “To manufacture in one part of the world and sell in another is turning out to be inefficient.” As if to make his point, Charney stops speaking for a moment to address a worker: “It's too much rib, you have to control that. Make sure it's not too loose, not too tight. Always flat, not too much, not too little.” To manufacture in one part of the world and sell in another is turning out to be inefficient. Dov Charney “That's the benefit of manufacturing in the U.S.,” he says, returning to our dialogue. “I can be in the factory while I'm on the phone talking with you and address a quality issue. If I'm on the phone in New York and the factory is in Bangladesh, it's not so easy.” “Of course there’s the argument that [domestic manufacturing is] ethical, but that's a kind of social argument. I’m telling you that it’s cheaper too — that’s what retailers need to know,” he says. “What local manufacturing allows you to do in the fashion context is accelerate or decelerate production.” The approach allowed American Apparel to experiment and quickly learn from its mistakes. “I learned a lot, we’ve learned from a lot,” Charney says. “But one of the things we did learn is that people will pay for predictable quality basics, and they’ll even pay more if it’s predictably available.” Just the Basics American Apparel gained new traction as a wholesaler after relocating to L.A., earning particular notoriety in the music industry for its 4.3 oz. 100% fine ring-spun combed cotton jersey. Charney’s manufacturing finesse wasn’t all that set American Apparel apart; he approached the business with a creativity and knack for garments that he and his parents say is in his blood. His paternal grandmother was an immigrant sewer in a knitting factory. His father Morris is an architect and his mother, Sylvia Safdie, is an artist. Her website sports a slogan that could have worked at American Apparel: “The body is the most personal place that you can express from.” Charney, of course, is a photographer, too — one who’s made quite a name for himself and his brand with a series of provocative marketing campaigns that both titillated and offended. Charney’s sexually charged photos of young women in various stages of undress are now synonymous with American Apparel’s brand and his own public persona. This troubles him because he believes his campaigns were varied and pushed important boundaries. In addition to young women and girls of diverse ethnicities and body types, Charney says, American Apparel ads depicted older women and older couples, interracial couples, older interracial couples and gay couples — a veritable checklist of in-your-face challenges to cultural norms. “We produced an enormous amount of variety — we were producing in some cases 30 ads a week in different markets. I kept shooting till the end. I was shooting days before I was fired,” Charney says. “We were doing selfies before the age of selfies. I was buying cameras for women and said ‘Shoot yourself’ because what a selfie is, is a real moment, it makes the person look larger than life.” We were doing selfies before the age of selfies. Dov Charney In his print ads — which have the sort of faded glow that suggests you’ve found a Polaroid hidden in a box of private snapshots — Charney was chasing one of his most prized attributes: authenticity. “What made it special is that it wasn’t rehearsed, it wasn’t contrived, it was honest. It was real,” Charney says. “The people were real, and we challenged notions of beauty because we rarely used professional models. I understand that not everybody understands the marketing, or that the media has raised hay over aspects of the marketing. But the reason that this was one of the most recognizable fashion ad campaigns or any ad campaign — a huge element of what made it special and why people connected to it — was its authenticity and its realness.” Charney defends the sexually charged images as superior to the airbrushed ideals presented by most apparel retailers, and believes the controversy was helpful to the brand. “I do think there’s something to be said for photography that challenges cultural norms, that challenges what people think are right and wrong,” he says. “People are going to buy into authenticity. It’s not like everybody likes ‘Walt Disney’ perfect. The imperfect is often more appreciated than the perfect.” And while it may be difficult for some to remember now, the shtick really did work. “The basics were good and they had normal girls that were cool and cute as hell, and live photos and they looked fantastic,” says Lee Peterson, executive vice president of brand, strategy and design at WD Partners, a global retail design firm, who spent 11 years at The Limited when it was still owned by Les Wexner. “To me, it was a good [campaign].” Charney’s company was more than good marketing. Especially when it came to basics, he had a well-honed instinct about style and quality, bucking trends to appeal to the sophisticated urban 20-something he saw as his customer. The company zigged as others zagged. While retailers like Aeropostale, American Eagle Outfitters and Abercrombie & Fitch were churning out apparel emblazoned with their logos, American Apparel’s merchandise remained free and clear of any corporate insignia — the people who wore its clothing advertised it through their sense of style. One of Charney’s innovations — using thinner fabric and cuts that many women find more comfortable and flattering — remains a contribution to women’s fashion basics. Inspired by the shirts worn by a South American girlfriend, he developed the “Classic Girl” in 1997, which took off in the rock-and-roll merchandise circles that were a large part of his wholesale clientele and has been copied by every other basics brand since. American Apparel also arguably launched the by now-ubiquitous trend of wearing leggings as pants. Charney seemed to understand that for women and men alike, “basics” mean more than just cotton T-shirts, hoodies and socks — an innovation highlighted by Racked in an elegy for the brand by the site’s editors. It’s not like everybody likes ‘Walt Disney’ perfect. The imperfect is often more appreciated than the perfect. Dov Charney But for American Apparel, the path from innovative garment maker to fashion icon and global retailer was fast and furious. At the turn of the 21st century, it was still a startup wholesaler, a huge hit among the merchandisers supplying rock and roll bands. But retail — and growth — proved irresistible. Charney relishes detailing this speedy rise, but for the business, it may have been too much, too fast. High Times Dov Charney turned a childhood obsession with American cotton T-shirts into an influential fashion brand with a burgeoning retail presence. In 2003, the first store opened in L.A.’s Echo Park neighborhood, followed by one each in New York and Montreal. Within two years, the company was expanding to Europe and opening 65 new stores. By 2006, there were 140 total stores and by 2009, there were 281. The company was global. It was “the fastest retail roll-out in American history,” as Charney called it. American Apparel store base (2003-2012) American Apparel rapidly expanded its retail presence, going from zero to 281 stores in just six years. Source: SEC Filing The rapid retail expansion coincided with a rising fashion influence that seemed almost impossible for apparel basics. The Guardian called the brand “the fashion sensation of 2008” and “the basis for the signature look of the extremely fashionable brigade.” British GQ’s then-executive style editor Jodie Harrison told the New York Times, "I happen to wear American Apparel practically every day of the week.” Outfits detailed in fashion photographs, whether on celebrities, models or stylish young people on the street, often featured at least one garment from American Apparel. But while Charney brought on young creative types to develop the company’s designs and marketing, he didn’t have a similar financial right hand to help steer the ship. That was fine as long as his suppliers were willing to take a chance on him, despite his financial setbacks and late checks. His ability to operate like a young entrepreneur dependent on a series of mentors and patient investors would eventually diminish. And his notion of ideal growth — bulk up profits by opening more retail locations — may have placed his fashion basics brainchild well beyond his expertise. “My thing about them was — he had a really great idea, and it was in the name, ‘American Apparel,’” says Lee Peterson. “They had good stuff, and they had key locations, too, which was really smart. But it wasn’t an idea that could be 300 stores. If they could have stayed at 50 to 100 stores they would’ve been fine. Everything changes after you do over 100 stores — operations, marketing, everything. It requires huge changes, and speed bumps. You start going from having A+ stores to C stores, but you’re only profitable on your best stuff.” There’s a niche market that’s growing that is the antithesis of fast fashion. Dov Charney One hundred stores is about what the company was running in 2007 when it went public via a sale — rather than an initial public offering — to Jonathan Ledecky’s Endeavor Acquisition Corporation, an investment firm known as a “blank check” company, for $382.5 million. (Blank check firms are publicly traded entities whose shareholders don’t know what acquisitions will be made before they invest.) This unusual but entirely legal way to go public avoids much of the due diligence that goes into preparing for an IPO. At the time, the company was doing well: In its first quarter of 2008, it reported net sales of $111.6 million, a 51.9% increase over $73.5 million in the year-ago period, while same-store sales rose 36%. The company had conducted direct sales online since 2004, with localized storefronts in the United States, Canada, the United Kingdom, Continental Europe, Switzerland, Japan, Korea, and Australia. By the end of the third quarter that year — with the company boasting 228 stores worldwide — retail sales had overtaken its wholesale operations, with U.S. retail sales alone on par with its wholesale sales, according to an SEC filing. By the end of 2008, the company ran 260 stores in 19 countries, with a workforce of 10,000 in large metropolitan areas, emerging neighborhoods, and select university towns. Net sales had risen 40.8% to $545 million from $387 million the year before, and same-store sales continued to rise. Most of the company’s expenses went to expanding its manufacturing in order to fill up all those stores not just with its signature basics, but more stylish offerings and basics beyond shirts, including jeans. The Great Recession was right around the corner, but Charney and Ledecky were transfixed by American Apparel’s potential. “We were shipping all over the world,” Charney says. “We had stores in 20 countries that were showcases of our brand, and almost all our stores were generating a profit. This isn’t a market of trillions. There was a niche market in New York, in Los Angeles and other parts of the world, even in Beijing. There’s a niche market that’s growing that is the antithesis of fast fashion — to buy basics that are ‘slow fashion.’ American Apparel had a static product line, we dropped things, we added things. What slow fashion is, is Converse All Stars, Levi’s 501 and the American Apparel basic tee.”

Retail space available. Canadian T-shirt company Gildan bought the American Apparel brand earlier this year for $88 million, but that didn’t include its stores, which are now all closed.(Credit: Nan Copeland)