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American Apparel Should Hire One of These 6 Executives to Replace Dov Charney

NEW YORK (TheStreet) -- Could ex-J.C. Penney (JCP - Get Report) CEO Ron Johnson be the next CEO of American Apparel (APP), taking over the reigns once held by the lightening-rod known as Dov Charney?

Such a scenario may seem like a long shot but at least one industry observer suggests that Johnson would be a good fit for the Los Angeles-based T-shirt maker currently involved in a high-stakes game of "Who's in Charge?"

Yet as American Apparel's board attempts to position the company for a second life, a life unlikely to include the controversial Charney, who else would be a good fit as its next chief executive? (John Luttrell, American Apparel's finance chief, was appointed interim CEO last month.)

Besides Johnson, industry sources speculate that Diane Neal, the former CEO of L Brands' (LB) Bath & Body Works would be a good candidate as well as retail veteran Mickey Drexler, currently the head at J. Crew and Australia's Billabong CEO Neil Fiske. Others mentioned as possible replacements for Charney include Tony Hsieh, CEO of the online shoe and clothing retailer Zappos, a unit of Amazon (AMZN), and former American Apparel executive Marty Staff.

"American Apparel is a very strong brand," says Edward Hertzman, founder and publisher of Sourcing Journal, a publication that focuses on the apparel and textile industry. "Replacing Dov [Charney] is going to be essential to turning this company around."

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Things may have settled down somewhat at American Apparel following its agreement with the hedge fund Standard General for a $25 million capital injection along with a reconstitution of its board. The changes created a committee to oversee the investigation into alleged misconduct by founder Charney, who was removed as CEO in June while designating him as "strategic consultant."

Following the investigation, the new board committee is expected to determine whether Charney can return to American Apparel. Few argue that the company would be better off if Charney doesn't return.

"No matter what they do with him, his presence as a leader has to be minimized," says Jason Hanold of boutique executive search firm Hanold Associates who specializes in placing executives in the retail, health care, financial services and technology sectors. "The question has become more about if they really hope to resuscitate -- and I don't mean fire fight -- to really avoid bankruptcy they really need to bring in a new leader. Frankly he's been a huge distraction to the organization."

Yet any new CEO will still have to face multiple challenges. American Apparel has been losing money for the past five quarters and servicing its $251 million in debt. A new CEO will also have to answer to a newly empowered board and a hedge fund with a big stake. 

Longer term, the 250-store chain must face the reality that traditional brick-and-mortar retail stores are losing revenue to e-retailers. American Apparel has a popular and well-known brand, but that may not be sufficient to offset consumers' increasing preference for online shopping.

"They need a leader who can get [employees] re-engaged and give them a sense of where they are going," Hanold says. "I think they need a big leader who brings a sense of certainty and confidence."

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