News of American Apparel’s (AA’s) demise may not be premature. The too-cool-for-school LA-based clothing retailer suffered humiliation in July when its auditor Deloitte & Touche resigned citing material weaknesses in the auditing and controls of the business. AA has said it may breach its loan covenants and that it may not have enough cash to continue operating in the next year.
Why this is interesting to Financial Director is that it comes against a backdrop of ongoing troubles with the company’s financial leadership. After one of its CFOs died unexpectedly of a heart attack in 2005, an interim CFO came and went within a week. We blogged in June 2008 on the departure of his successor, Ken Cieply, who walked after press reports quoted his chief executive and founder of the business Dov Charney calling him “a complete loser” and adding that he had “no credibility” in the retail apparel industry.
Charney later retracted his comment, but Cieply resigned a fortnight later: in a change of heart, Charney’s parting shot was that “Cieply’s impressive pedigree in apparel was a key reason I asked him two years ago to come down to Los Angeles to help take our business to the next level”.
Cieply’s successor William Gochnauer was brought in to cover on an interim basis and finally, in 2008, the company hired its current CFO, Adrian Kowalewski, from within. But even having had extensive experience in financial restructuring and in advising on M&A – and having been with the clothing company for two years previous in a senior financial role – it seems Kowalewski couldn’t tame the beast either. Odd and odder.