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More disappointing news coming from American Apparel: The L.A.-based brand announced Monday that it will shut down stores and lay off staff members as it works on cutting costs and making the company profitable again. According to a release, the company stated that the cuts are expected to save $30 million but didn’t specify how many shops would be closed or the number of jobs affected.
“We are committed to turning this company around,” Paula Schneider, CEO of American Apparel, said in a statement. “Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability.”
The company stated that even if it increases revenue and cuts costs, there may still be the need to raise additional capital in the next 12 months.
“Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years,” continued Schneider, who joined the retailer last December following the firing of founder and former CEO Dov Charney. The company has lost $340 million in that time, and in May, the company reported a loss of $26.4 million in the first quarter of 2015, in comparison to the loss of $5.5 million during the same period last year.
In addition to sales decline, the retailer has been in an ongoing legal battle with Charney. Colleen Brown, the chair of American Apparel’s board, most recently filed court documents alleging the founder sent inappropriate messages with the company’s electronic devices. The documents were filed in response to a defamation lawsuit filed by Charney in his attempt to win back the business.
Since coming on, Schneider has made several moves in an attempt to revamp the company’s image, including replacing its racy ads with more female-friendly campaigns. Later this year, American Apparel will introduce a redesigned fall line focused on women’s and men’s basics and key items. Said Schneider, “The new styles are designed to increase revenue as we continue to evolve our product offering during this important selling season.”
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