American Apparel is a brand on everyone's mind these days. And as most know, the company has had a challenged past, resulting in a chapter 11 bankruptcy filing in October of 2015. Reportedly, through that process, the brand agreed to convert their $200+ million dollars of debt into equity as well as bring on new debtor financing and additional capital. This restructuring and eventual exit from bankruptcy was due in no small part to Chelsea Grayson who came on as General Counsel, and eventually took over as CEO. I'm honored to be able to call Chelsea a friend and thought readers would be interested to hear her side of the story as American Apparel is, once again in the news cycle with its impending wind down. Here's the transcript of our interview and the real story in her own words.
LM: My understanding is that American Apparel sold as a license? Some would argue that selling a brand as a license is where brands go to die. Do you think American Apparel will survive this sale?
CG: American Apparel sold its brand outright, not as a license, and I am confident that the American Apparel brand will continue to thrive under its new ownership. As the Company's CEO, I was tasked with substantially improving our operations so that we could ultimately attract competitive bids and sell the business, with a key focus on the long-term preservation of the brand. It was after careful consideration and exploration of all strategic options that we successfully sold the brand to Gildan Activewear. Gildan has facilitated the evolution and growth of many other iconic apparel brands over the years, and recently announced that they plan to continue the important "Made in the USA" tradition that is at the core of the brand. In fact, as a single mom of two teenagers, we very much care about the survival of the American Apparel brand, both as customers and because the brand's identity is so beautifully intertwined with Los Angeles, our native city.
LM: What's next for you?
CG: Having been the CEO and a Board member of a manufacturing entity, with global retail, ecommerce and wholesales businesses that spanned a 50-country footprint, there aren't many issues I haven't had to address. I am eager to roll up my sleeves and impart the many hard-earned lessons my management team and I learned along the way in another C-suite position and additionally on another board of directors. I also intend to devote a portion of my time to helping Los Angeles' chronically homeless population. My office is in our main sewing factory, on the edge of the garment district in Downtown Los Angeles, where, for many square blocks, there are chronically homeless people. I drive through these communities every day on the way to and from the factory, and I am compelled to enact change. I've led several initiatives while running American Apparel that were aimed at improving impoverished lives, and I will continue this work after I leave.
LM: Are you proud of what you've accomplished or do you wish you could have done more?
CG: I am very proud of what we accomplished as a team at American Apparel. We dramatically improved our supply chain and quality control so that our products could continue to be made in the USA. We overhauled the look, feel and shopability of our ecommerce site, and we also launched a "Factory Site" that catered to our more price-sensitive customer and curated that customer's experience with sale products. We modernized our marketing plan, focusing on social media, fan engagement (critical, with approximately 5 million followers) and, most importantly, social media influencers. We revamped our planning and allocation process so that we could more effectively meet customer demand. When I joined the Company, it had lost over $300 million over the previous five years; our efforts enabled the Company to operate and save jobs for another two and a half years. All of these incredibly challenging endeavors enabled us to attract multiple interested buyers and ultimately complete a successful sale to Gildan.
LM: Do you think that the fact that the brand is called "American" Apparel and will be owned by a Canadian company will hurt or help the brand? Will Americans still want to buy the brand?
CG: Gildan has invested significantly in its US operations, it trades on the New York Stock Exchange and, most significantly, it has announced that it will continue to make American Apparel branded products in the USA. Our clothes have served an important workhorse function in peoples' wardrobes: we transformed the idea of fashion basics. I know I'll continue to live in the brand and our customers have always been fiercely loyal as well.
LM: What made you join American Apparel in the first place?
CG: When I joined, American Apparel was more than an apparel company; it was a call to action. The Company was fervently dedicated to social commentary, including pro-immigrant immigration reform (including a partnership with the New Americans Opportunity Fund, established by the California Community Foundation), LGBTQA rights (including a longstanding philanthropic relationship with the Human Rights Coalition) and female empowerment (particularly as it relates to healthy body image - we use ordinary women instead of traditional high-fashion models, and we don't airbrush our marketing images.) The brand was also iconic, not just as an American brand, but as a Los Angeles brand. We made all of our own products in five manufacturing facilities in and around downtown Los Angeles, my native city, where I was born and raised and where I continue to live with my children. Inside the Company, we like to say that our marketing campaigns generally have three models: the models who wear the clothes, our iconic pink sewing factory (which also serves as our corporate headquarters) in DTLA and the beautiful City of Los Angeles. As I discussed earlier, the Company had lost over $300 million over the previous five years, but this beautiful brand deserved to live, and I absolutely wanted to be a part of preserving the brand's long-term legacy.
LM: What made you believe in the brand?
CG: What makes American Apparel special is the fact that the brand has always stood for more than just clothes. The same qualities (noted above) that made me join the Company in the first place were the very ones that made me believe in the brand and its strength, which ultimately led to our success in the auction process.
LM: What is your favorite piece of clothing you own from American Apparel?
CG: The Dylan Trench, in paperback. For me, this is one of those classic, timeless pieces that I can use in nice weather to elevate any outfit - whether I throw it over skinny jeans and our halter bodysuit, our mock neck mini dress and tights or a more traditional dress that I would wear to work.
LM: As an avid fan of the brand, I'm personally interested to see how the new ownership will transition through the sale and how they will maintain their brand equity and integrity.
It's equally exciting to see what the next impossible task Chelsea will undertake now that she has tamed this beast. She told me during our lunch that she plans on taking some time off, but frankly, I'm not sure an off button is in her DNA.