American Apparel names outsider Scott Brubaker as interim CEO
American Apparel Inc. is bringing aboard two fresh recruits, one as interim chief executive and one as new chief financial officer, as part of an effort to move beyond a summer of dramatic upheaval.
The Los Angeles company tapped Scott Brubaker, a managing partner at turnaround firm Alvarez & Marsal, as interim CEO. He will succeed John Luttrell, who is leaving the company after serving as chief financial officer and interim chief executive.
Hassan Natha, a former Nike executive, was named as the new finance chief, American Apparel said Monday.
The executive shake-up comes as American Apparel seeks to shake off months of turmoil after its board ousted Dov Charney as chairman and suspended him as chief executive in June for alleged inappropriate behavior.
Brubaker and Natha can bring some much-needed expertise to a company riddled with corporate intrigue, analysts said. But they are facing daunting problems, including a heavy debt load and changing consumer tastes, just as the retailer kicks into high gear for the all-important holiday season.
“They got the A team on board,” said Craig Johnson, president of consulting firm Customer Growth Partners. “But this is a company that has been grossly mismanaged with endemic problems across a number of fronts.”
American Apparel’s financial outlook is anything but rosy: It has lost about $290 million in the last 4 1/2 years and carries more than $200 million in debt. In its second quarter, the company reported flat sales and a loss of $16.2 million.
By bringing in Brubaker, American Apparel has hired someone with experience in interim and advisory roles for a number of companies, including retailers such as Eddie Bauer.
Allan Mayer, co-chairman of American Apparel, said Brubaker started working with the retailer a month ago when he led a consulting team from Alvarez & Marsal tasked with shoring up the company’s finances and accounting.
“Scott really impressed the board with how quickly he got his arm around the situation,” Mayer told The Times. “He has a strong background working with apparel companies and retailers.”
Mayer said that Luttrell, an industry veteran who was hired in 2011 as American Apparel’s CFO, was “ready to move on.” A person familiar with the situation said Luttrell had told the board months ago that he was tired of the turmoil and wanted to leave soon.
“John was definitely not pushed out,” Mayer said. “We are very grateful for his service.”
Brubaker said in an email that he planned to work with the American Apparel team “to execute on the company’s strategic initiatives.”
“American Apparel has a strong business model and can bring products to market very quickly with its U.S.-based manufacturing footprint,” he said.
His tenure at the company will be short — probably just a few months, according to one person knowledgeable about the matter. Brubaker’s primary role will be less as a turnaround expert than a transitional manager focused on streamlining the company’s operations.
“This is about process and discipline,” the person said. “Finding the right people to serve in those areas who are going to support and execute on those processes. It’s not rocket science, but it takes attention.”
Brubaker is joining a host of new faces at the company. American Apparel recently replaced all but two members of its board. The six new directors include the company’s first two female board members.
One of the female directors, Colleen B. Brown, recommended Natha for the CFO job, Mayer said. Brown formerly worked as chief executive of media firm Fisher Communications, where Natha once worked as chief financial officer.
Overhauling the board was part of American Apparel’s deal with New York investment firm Standard General, which had extended the company a $25-million financial lifeline. Standard General controls a nearly 44% stake in the retailer through a cooperative stock-buying arrangement with Charney.
Charney is working as a paid consultant for American Apparel, pending the results of a company investigation into his alleged misconduct, including accusations of inappropriate behavior with employees.
A special committee of directors will determine whether Charney will be reinstated to the company he founded. A decision should be made by mid-October, a person familiar with the matter said.
That decision may quiet the intense scrutiny of American Apparel, the retailer that is known as much for its flamboyant founder as for its racy advertising and its made-in-America manufacturing model.
Observers said a reinforced lineup of skilled managers still does not overcome some of the deep obstacles the retailer faces.
“Adult supervision is not going to help if they are competing against Zara and H&M and Forever 21,” said Ronnie Moas, founder of Standpoint Research. “All of the supervision in the world is not going to erase the $200 million in debt.”
The interim CEO and new CFO are also coming aboard too late to make drastic changes to American Apparel’s holiday plans, analysts said.
“A lot of places have Christmas stuff on the floor now,” said Johnson of Customer Growth Partners. “To try to save the holiday season at this late date, you really have to believe in Santa Claus.”
Twitter: @ByShanLi
