Beleaguered Los Angeles clothing maker American Apparel Inc. has named a former Blockbuster Inc. executive as its acting president to help redirect the company, which appeared to be on the brink of bankruptcy this summer.
In hiring Tom Casey, who was executive vice president and chief financial officer of Blockbuster from September 2007 through August of this year, American Apparel is bringing on an executive who doesn’t have an apparel background but who has ample experience working with another troubled company.
After suffering from massive debt and stiff competition from new players such as Netflix and Redbox, Blockbuster filed for Chapter 11 bankruptcy protection last month.
In recent months, American Apparel has been beset by problems with its debt, sales declines, delayed quarterly filings and an investigation by the U.S. attorney’s office in New York related to the company’s abrupt change in accounting firms.
Although the Casey announcement Friday “isn’t the whole answer” to American Apparel’s problems, his appointment is a step in the right direction, said Howard Davidowitz, chairman of national retail consulting and investment banking firm Davidowitz & Associates Inc.
“The person they brought in has had heavy experience dealing with the exact issues that American Apparel has,” he said. “He’s not an apparel expert, he’s not this or that, but at least he does know restructuring. It gives them the opportunity to stay alive.”
The appointment pushed American Apparel’s shares up 12 cents, or 10.3%, to $1.28. Its shares have plummeted 59% year-to-date.
The company said Casey would report directly to founder and Chief Executive Dov Charney and would have primary responsibility for developing the “going forward operating strategy of American Apparel.”
In a telephone interview Friday from Canada, where he was visiting stores, Charney said he felt confident that the new hire would bring “something to the company that we need.”
“I do think we want to widen the management team, and this is the first step in that direction,” he said. “And it will free me up to focus on sales and the creative element of the company, that’s for sure.”
Peter Schey, a lawyer for American Apparel, was quick to point out that Charney was not taking a reduced role. In an e-mail to media, Schey said the company’s outspoken chief executive would carry the same level of responsibility as before but would spend “somewhat less time on administrative matters and more time building revenue.”
“We expect that by the end of this year we will have successfully overcome the challenges that appeared in the last few months,” Schey said. “We’re dealing with these issues in a way that maintains the ethics and principles on which the company was built. We’re not going to run offshore, fire workers, slash wages or close down stores for short-term gains. CEO Dov Charney is in this for the long haul.”
The announcement came a week after the company said it was working to realign its capital structure, including hiring several new senior executives, and had amended its debt agreement with London-based private equity firm Lion Capital.
American Apparel employs about 10,000 people, many of them in L.A., and operates more than 280 retail stores in 20 countries.
At Blockbuster, Casey was responsible for strategic planning, finance and accounting, information technology, real estate and international operations.
Prior to Blockbuster, he worked for 20 years as a financial advisor to companies undergoing strategic change in the retail and consumer products industry.
In a statement, Casey said he admired the company’s “commitment to creative thinking and fair treatment of its textile and apparel workers.”
“I am intrigued by the international appeal of the brand and the company’s vertically integrated and Made in USA business model,” he said. “I see American Apparel in the early stages of its development, and I believe that my experience can help shape the company’s future.”