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Dov Charney | Flickr

Jobs + Skills06.20.14

American Apparel Already better off Without CEO

Dov Charney’s lewd image as the clothing chain’s chief executive and marketing personality reflects a dying trend in retail branding.

Mid-size American Apparel’s ouster of CEO Dov Charney this week sends a strong signal to other retailers that sex doesn’t sell in the boardroom – or with today’s teens.

After years of controversial behavior in and out of the office – including sexually provocative ads featuring girls who appear to be under 16, walking around the office in his underwear, and multiple sexual harassment lawsuits – Charney was unanimously fired Wednesday by American Apparel’s Board due to an “ongoing investigation into alleged misconduct,” the company stated.

Although the company’s statement did not give specifics, Charney’s behavior “did not appear to be criminal in nature but involved his personal conduct with women and poor judgment,” an unnamed source told the Los Angeles Times.

Board Member and interim co-chairman Alan Mayer told the Times that the board launched an investigation earlier this year after “new information came to light” and that the decision to fire Charney, who founded the company in 1998, had nothing to do with any problems with the company’s operations.  “We take no joy in this, but the board felt it was the right thing to do,” Mayer stated.

The board has supported Charney in the past against charges of sexual harassment and assault from former employees in 2005, 2008, 2011, and 2012. American Apparel has also taken defensive measures to protect the company from Charney’s risky behavior, including an “agreement to binding arbitration” clause in all employee contracts to reduce lawsuits.

But while boards might support controversial behavior when executives are delivering strong results, Charney’s antics have only proved that sex no longer sells to today’s teens.

American Apparel has delivered increasingly poor results to investors since the recession, with shares down from an all-time high of about $27 in 2007 to about 68 cents— although the stock jumped seven percent on Thursday on news of news of Charney’s firing.

With its focus on sexually provoking advertising, the company hasn’t made the move beyond expensively priced basics — such as t-shirts, sweatshirts, and leggings — to more innovative fashions, retail analysts say.

Rival retailer Abercrombie & Fitch made a similar misstep, and is now doing away with half-naked models and dimly lit nightclub-like stores after two years of declining quarterly same-store sales. In January, Abercrombie & Fitch also stripped CEO Mike Jeffries of his chairman role after the retailer lost market share to so-called “fast fashion” chains like Forever 21 and H&M.

With their exposure to social media and the Internet, teens are more likely to have an individual sense of style, according to retail and brand consultant Marcie Merriman in Business Week. She says today’s teens are “radically different” from other generations because they reject uniforms – including pricey jeans and t-shirts. But many teen-oriented retailers have been slow to connect with this generation, relying on sex instead to sell outdated ideas.

Another rival, American Eagle Outfitters, saw some growth in 2012 after focusing on more current fashions, but eventually fired Chief Executive Robert Hanson in January after a company downturn in 2013.

Despite his outrageous behavior and misguided marketing tactics, American Apparel’s Charney has been praised for his business advocacy for the Made in the U.S.A. manufacturing movement and immigration reform – strategies the retailer may want to hold onto after his departure.

“Dov Charney created American Apparel, but the company has grown much larger than any one individual and we are confident that its greatest days are still ahead,” Mayer stated. If the mid-market company can successfully retain Charney’s business reforms, while removing his bad behavior, that may just prove to be true.

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