If American Apparel LLC's Monday Chapter 11 filing in Delaware wasn't evidence enough that its turnaround strategy had failed, court papers show just how horrifically the Los Angeles retailer's initial emergence from bankruptcy in February was mismanaged.
American Apparel's turnaround strategy aimed to improve on its underperforming online sales numbers as more and more consumers turn away from brick-and-mortar stores to do their clothes shopping. Online sales actually declined this year, American Apparel CRO Mark Weinsten said in a declaration.
In 2015, American Apparel generated roughly $52.20 million in net sales from its e-commerce business, about 10% of its total sales figures. Its competitors derive roughly 20% of their sales numbers from e-commerce on average, Weinstein said.
Even the products that were sold were unsatisfactory to American Apparel's customers. The company effectively shut down distribution for a time after an internal audit showed that it had failed to address its quality control problems.
"Garments were manufactured and placed in the distribution system without inspection and with little attention to detail, resulting in high customer returns and customer dissatisfaction," Weinsten said.
The ouster of CEO and founder Dov Charney - sweeping away his penchant for sexually provocative ad campaigns in the process - apparently didn't result in a repositioning of American Apparel in consumers' minds.
"Over the last two years, the company lacked a marketing plan and engaged in ad hoc advertising that lacked focus and did not attract or interest the company's core customer base," Weinsten said.
All of those missteps added up to a company that emerged from Chapter 11 functionally rudderless. Sales dropped by roughly 32.7% year-over-year as of Sept. 30 and the company was borrowing $2 million a week just to stay afloat, Weinsten said. CEO Paula Schneider left the company in October.