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Life After Dov: Meet the Woman Orchestrating American Apparel's Comeback

After founder Dov Charney's ousting, CEO Paula Schneider is trying to bring American Apparel back to its glory days.

The changes at American Apparel are evident as soon as you step in a room with Paula Schneider, the company's new CEO. Five minutes into our conversation we're discussing the finer points of the brand's new designs, the trouble with selling unisex clothing to men, and the brand's unfortunate overabundance of spandex. The off-the-rails behavior from founder Dov Charney that has captured the first line of American Apparel stories for over a decade (strip club fittings! masturbation! three-legged dog chases!) is clearly a thing of the past.


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She's wearing American Apparel, but 57-year-old Schneider is the first to acknowledge she's not the company's key demographic. It's not a problem, she says, because she's not the one defining American Apparel's aesthetic. "I have all of these millennial consumers who work for me," Schneider tells Racked. "So it’s easy for me to ask the questions ... And then I’m like, ‘Ok, well, if you don’t get it then no one’s getting it.’ It’s a completely different way of doing business."

On June 8th, the company set forth a manifesto detailing all the ways in which the American Apparel was shifting from "chaotic to iconic," with an end goal of becoming a $1 billion brand. This isn't the first time that promise has been made: Charney had billion-dollar dreams for the brand since before it became a public company almost a decade ago.

Nevertheless, Schneider's got a plan. It boils down to a couple of key points, as she has reiterated in many, many interviews over the past few months. Essentially, the company has too much product that isn't selling fast enough, the advertising is too sexy, the website is too clunky, and the stores are too haphazard. But for all of its problems, Schneider insists that American Apparel is still fundamentally a strong brand. "It just needs a little tweaking," she explains.

Schneider insists that American Apparel is still fundamentally a strong brand. "It just needs a little tweaking," she explains.

On a day-to-day basis, Schneider is honed in on pushing the turnaround efforts forward. Designers now attend best and worst seller meetings, and the new ads feature product that can be found in the stores at all times. The new PR director has been tasked with getting the clothes in the hands of celebrities and bloggers, which has been going over well. Nicki Minaj repped an American Apparel bodysuit in her "Feeling Myself" video. Miley Cyrus Instagrammed herself in an American Apparel equality tee two weeks ago. Beyoncé likes the socks.

If the product sells well, Schneider isn't taking credit for it. "I’m not the arbiter of the taste," Schneider tells Racked. "I’m not the millennial consumer. I know what I like but you know, this notion that as the CEO of the company, I’m controlling everything down to that level is not realistic."

Cynthia Erland, American Apparel's new head of marketing and advertising who has worked with Schneider in the past, says that the CEO has always taken a hands-off approach to management. "Even back then [at Laundry by Shelli Segal], Paula’s management style has never been about micromanaging," Erland tells Racked. "Paula has always been a president, and now a CEO, that hires the right people to lead their teams, and lets us do our thing and report back to her. Of course we’re still accountable, but she’s definitely in no way a micromanager."

It's a far cry from Charney's management style, which was often characterized by an obsessive involvement with the company at all sorts of levels. He starred in American Apparel's ads. He dated employees. He publicly posted his phone number and email address to "start a dialogue" after reports surfaced detailing the retailer's questionable hiring practices. When the company's new distribution center ran into massive problems in 2013, he dragged a mattress into the building, built a shower in the restroom, and lived there for three months until everything was sorted out. And since his ousting, American Apparel has released even more evidence of unusual, even unacceptable, behavior.

"I’m not the millennial consumer... this notion that as the CEO of the company, I’m controlling everything down to that level is not realistic."

Charney's need to be involved in every part of the company created a strong sense of loyalty among some employees. "Dov was obsessed with working for the company, which was his life’s work and it was incredibly motivating to watch that happen," one former employee says. "After Paula started, even though I had built somewhat of a rapport with her before she started in her position, I think I spoke to her maybe twice. I never saw her unless I passed her in the hallway to the bathroom."

On the other hand, Charney's micromanaging was also a big part of why Benno Russell, American Apparel's former art director, left in 2014. He had worked with the company for over a decade, playing an instrumental part in creating the look and feel of American Apparel's branding. It was his "baby," he says, and he doesn't discount the value in some of the aspects of the brand, including the diversity of the models and the ads that didn't push product.

"I think there was a lot of value to [the ads] because the whole thing, to the general public, didn’t feel so strategic," Russell tells Racked. "I think our generation, anybody under 40 or 50 is suspect of stuff that is over-strategized and whatnot so it was very refreshing."

When the company struggled financially during the economic crash, however, the atmosphere changed. "As it was flatlining, [Charney] kind of turbo-charged his micromanaging," Russell says. "I just lost control over more and more and in the end I was only doing wholesale catalogs. I just had to call it quits. I couldn’t operate anymore."

The lack of structure within the team, the racy ads that pushed the envelope too far, and Charney's unconventional hiring methods—"Some girl that Dov had met in New York all of a sudden was a creative director, above me, and could direct what I was doing," Russell says—pushed him to the breaking point.

Picture: American Apparel

After Schneider took control, she and Erland approached Russell with the intent to bring him back into the fold. "I had a laundry list of conditions and in the first three minutes of conversation, I heard everything I wanted to hear," Russell explains. "Paula said, 'Look, I’m gonna hand the keys to you and you’re gonna have to do it, on your own.' And that was the greatest thing I’d ever heard." Russell was re-hired as American Apparel's design director of branding in April.

Not everyone who had such a history with the brand was treated with such value, though. Immediately when Charney was stripped of his position, some of his closest supporters lost their jobs in quick succession, including his father Morris Charney, who was involved with the brand's Canadian operations, and Iris Alonzo, one of the brand's longtime creative directors. Alonzo was hired on in 2005 and helped lead the company for almost a decade even though she had no formal degree, according to a 2007 Self Service interview.

The company went three months before interim CEO Scott Brubaker hired Alonzo back on to "restore some normalcy to a difficult situation," according to WWD. Soon after, in January, Schneider officially replaced Brubaker as American Apparel's new CEO. According to Bloomberg, Charney initially endorsed Schneider as his replacement, which helped her build trust with executives early in the transition.

"Paula’s management style has never been about micromanaging."

However, a few months in, old management started getting cut from the team. Alonzo was fired again in February, reportedly without cause. Marsha Brady, American Apparel's other creative director, was also fired at the same time. By April, four more women who had spent years building careers at American Apparel were let go. Patricia Honda, the company's president of wholesale since 2001, left the company last week. In contrast, people who had left American Apparel before Charney's ousting, like Benno Russell and merchandising director Tasi Rippel, were hired back on.

The divide between old and new management is much more visible online, where sites like SaveAmericanApparel.com and TeamDov-AmericanApparel.net cropped up to show support for Charney and call for Schneider's removal. The latter site lives as a virtual petition in support of Charney's reinstatement, collecting over 750 signatures from current and former employees in all areas of the company, as well as vendors, fabric suppliers, old colleagues, and both of Charney's parents. Many of the signatures are accompanied by pleas, in an array of languages, imploring American Apparel to bring its founder back to the company.

"Though you’re not physically here with us at the moment, the factory is a constant reminder of the kind of man you are," Alonzo wrote, two weeks before she was fired. "Only an extraordinary person would build something this ambitious and special."

On SaveAmericanApparel.com, there are galleries filled with photos of employees protesting the new management. Workers picketed outside the National Association of Women Business Owners when Schneider spoke there in mid-May, holding signs that read "A Woman That's Hurting Women" and "Hey Paula, My Family Is Struggling. How's Yours?" There's photos of employees wearing "I Love Dov" and "Save Our Company" shirts while at work on the factory floor. The company has reportedly cut hours and interfered with workers who have tried to unionize.

AAoutside

Picture: Getty Images

In mid-June, Schneider sent out a memo addressing some of the concerns raised in a company-wide survey last March that polled employees on their working conditions. "You asked for paid sick leave, implementation of a retirement benefit plan, and improvement in the Company’s health benefits plans," the memo reads. It then addresses each category point by point, saying that the improvements will "soon be implemented" except for paid sick leave, which went into effect at that time. California-based employers were all mandated by law to offer three days of paid sick leave for every worker by July 1st.

At the executive level, Schneider filled in the gaps with new leadership that looks distinctly different from the old American Apparel. Brian McHale, who has a background at DIRECTV and Starz Entertainment, was brought on as the brand's first Chief Information Officer. Thoryn Stephens, who previously worked at Fox Broadcasting, ShoeDazzle, and MySpace, took over as American Apparel's first Chief Digital Officer. The new Chief Financial Officer, Hassan Natha, comes from Fisher Communications and Jones Soda Co. Erland has a fashion background at brands including Perry Ellis, ABS by Allen Schwartz, and Laundry by Shelli Segal (where she worked with Schneider previously). Brad Gebhard, the new president of wholesale, was most recently the CEO of IntelliSkin, a brand of posture-correcting apparel. Christine Olcu, the new general manager of global retail, comes from Express. The company's entire board of directors, with the exception of Allan Mayer and Martin Bailey, has been replaced in the past year.

Under new management, American Apparel is still struggling to reconnect with its customers. In Schneider's first three months, the company reported net sales of $124 million. That figure is down from $137 million in the same timespan in 2014, $138 million in 2013, and $137 million in 2012. While the most recent sales could be affected due to American Apparel's increased promotional strategy, which means it needs to sell more in order to hit the same numbers that the company was reporting under Charney, it appears that, overall, shoppers have yet to catch on to American Apparel's new look. From the shareholder perspective, company stock hit an all-time low recently, trading at just 41 cents per share on June 23rd according to Marketwatch.

Still, Schneider is only six months into the job. To date, new measures have only started to materialize in small ways online and in stores, and according to Schneider the initial response has been positive. "For spring, we had one [product] group that was the magnolia group," she says. "We put the magnolia group online, we put it in every window—it blew out." In the fall, American Apparel plans on releasing a whole new line of product.

That’s not the only change for fall: the company announced just this morning that there will be another round of layoffs and store closings, reducing operating expenses approximately $30 million over the next 18 months.

"We just want to make sure we’re respecting the young ladies and making sure that we don’t have anything that’s offensive to our core customer."

On the online front, the revamped webshop tries to better merge the branding of the site with the retail aspect of the site. Shoppers are now greeted with four easy product categories to explore right at the forefront of the homepage, and the display advertising is all up-to-date. However, American Apparel's comprehensive online ad archive has been shoved off to the part of the site dedicated to investor relations and wholesaling. If you can find it, you'll notice that the archive has been edited: it starts with mid-2011 ads and omits anything deemed too crass by current management.

"If we felt it looked offensive or the girls looked underage, we decided at this time to take [the ads] off," Erland explained. "But it doesn’t mean that we don’t embrace provocative imagery. We just want to make sure we’re respecting the young ladies and making sure that we don’t have anything that’s offensive to our core customer."

But some have argued that American Apparel's ads—all of them, the banned and the celebrated—were significant in creating American Apparel's core customer in the first place. "Recasting the brand in a positive, inclusive, socially conscious light would not be my #1 priority," a Seeking Alpha investment blogger wrote, in a critique of American Apparel's presentation of its new strategic plan. "The brand is strong with American Apparel and although it is important for a fashion company to keep evolving to stay cutting edge, this is not American Apparel's major problem. This slide [in the brand's strategic plan] portrays previous campaigns as amateurish while the company has enjoyed great success with them, even though they often offended many."

Another former employee says that one of the old ads in the slideshow with the text that says "She loves to mix pleasure with play" never even ran in any public campaigns. Some of the old billboards depicted in the strategic plan may have never been produced as well. An American Apparel spokesperson declined to comment on the allegations.

The new advertising has attracted its own set of bad press, too. American Apparel touted its "Hello Ladies" campaign as a first look at the reformed brand, but the ad featured and was reportedly conceived by some of the women who had just been fired from the company. In another instance, a leaked casting memo from a modeling agency that American Apparel was in contact with for its new campaigns announced that the brand no longer wanted to hire models that looked like "Instagram hoes" or "THOTS." The agency took responsibility for the offensive remarks, but Erland was also called out for allegedly saying that the brand wasn't going to feature "short" or "round" models anymore but instead pivot towards a more "Eastern European or Russian" look.

Erland has completely denied the allegations. Notably, all the past advertising work on her portfolio site, ErlandCreative.com, exclusively features white, straight-size models. Right after that news hit the internet, American Apparel pushed out a picture of two plus-size models on its social channels, accompanied with the caption: "This is American Apparel, always has been and always will be. We love all of our models, all shapes and sizes. #welovediversity #weloveyouall!" It's the only time plus-size models have been featured on the brand's Instagram feed all year.

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