Reviewing the available financial statements from 2007-present, as well as past articles, when did the company start declining? And where?
American Apparel’s financial status began to decline in 2007. Since the company was facing a lot of lawsuits which are against them. It gave investors no confident in this company. Company’s CEO, Dov Charney, has a lawsuit against him in sexual harassment. This lawsuit is enough to down grade the company’s reputation. Share price went down and less company would have partnership with American Apparel. Other than the CEO’s personal lawsuit, American Apparel was facing another scandal. Their hiring practices were questioned and were revealed to the public that the company hired legal workers. They had to fire over a thousand employees in order to avoid another lawsuit. However, the firing process was according to the employee’s appearance. The company would fire ugly, overweigh and unattractive people first before considering the employee’s performance. This discrimination was later revealed to the public as well. Multiple lawsuits caused their brand names to decrease and it had a domino effect which eventually affected the company’s financial status.
Take a look at the recent financial statements (cash flow statement in particular) – with 14 million injected into the company right away, how should the company allocate this money? Into which activities? And why?
14 million isn’t a lot of money for a public corporation. The company needs to use the money wisely before losing their last line of defense. They should pay off the short term debt and regain their confidence to their partners. They can run a minor positive advertisement but should not run a large scale of advertisement. It is because all the lawsuit against them are free advertisement and all the company can do are to cool down themselves and wait for customers to forget about their scandals. 14 million should be used up in paying off debt and leave cash on hand.
