American Apparel will close underperforming stores and cut jobs as part of a $30 million cost-cutting strategy to turn its floundering business around.
The company said Monday it will aim to add new stores in more profitable markets while closing stores in “unprofitable and over-saturated markets.” American Apparel (APP) declined to give more details regarding how many or where stores will be closed, as well as how many jobs will be cut. It operates 239 stores in 20 countries.
The announcement came as part of the next phase of the company’s turnaround strategy under new CEO Paula Schneider, who was named in December to head the Los Angeles-based retailer.
Schneider is tasked with reviving the company as it attempts to recover from years of falling profits at the same time it’s embattled in multiple lawsuits from ousted founder and former CEO Dov Charney.
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American Apparel reported a net earnings loss of $26.4 million in the first quarter and a 5% decline in same-store sales. The company had $340 million in net losses over the last five years.
Cost-cutting, including store closures and other unnamed actions, is expected to reduce operating expenses by $30 million over the next 18 months, the company said. The efforts “are aimed at stabilizing the company financially by maximizing retail store performance and revamping . . . merchandise assortment,” the company said.
“Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability,” Schneider said in a company statement.
The company also announced a new product line for fall “focused on advanced basics.” In an interview with USA TODAY in June, Schneider said that one of American Apparel’s problems is too much inventory and that the company needs to cut its number of products while introducing new, exciting merchandise.