American Apparel sells out?

Dov Charney's American Apparel is selling out for $382.5 MM (US)! The horror!

This is a watershed moment in the apparel business and one filled with so many ironies and contradictions.

I knew AA from the very beginning (when Dov would produce home made catalogs with even more suggestive photos back in the late 90's). AA's whole business model was based on socially responsible T-shirt manufacturing. Sure, the sex and style thing was important, but no message was more prevalent than the fact that this company cared for its workers in its downtown Los Angeles factory.

Dov railed against the machine from day one. I remember him calling retailers like Guess, Gap etc "assholes" for offshoring their production and paying minimal wages to downtrodden factory workers in Malaysia, etc. He waved his banner proudly and vigorously stuck his middle finger at the Man. In the early days, I did not think his business would fly given the commodity driven nature of the T-shirt industry. His prices were high, stock levels were awful and product quality was a mess.

But eventually, he figured it out and was able to mine a very profitable vein - the socially aware teen market. Sex sold, socially conscious manufacturing sold, Playboy/girl magazine covers on the walls of his stores sold, his sexual harassment suits attracted all sorts of attention ... and ultimately sold. Genius! As Seth Godin would say, American Apparel's Purple Cow was not clothing at all, but the idea of socially responsible clothing manufacturing.

While this was happening, skinny teens/tweens bought boatloads of expensive AA gear from the retail stores. Eventually (and shockingly) conservative corporate groups jumped on the bandwagon as they bought AA gear for their events (disclosure - yes, we partly are responsible for spreading this gospel to the corporate/cool crowd).

Does all of this change with the sale of his company to Endeavor Acquisition Corp? Endeavor has plans to take the company public and also plans to blanket the world with more stores so they can take on the likes of ubiquitous retailer Abercrombie and Fitch. A&F is not known for its socially responsible manufacturing (at least in AA's view). Is this the future of AA? Coming to you soon in America's suburban malls?

This raises an interesting question that all public companies face. Can the original spirit and joie de vivre be maintained when a company is now subject to the pressures of Wall Street and a shareholder base? Shareholders are typically different than customers in that they really only care about returns, profits, dividends etc (socially responsible manufacturing is nice and all, but only when it delivers a profit).

I am sure that Dov and his partners have thought long and hard about this. It would be a shame for them to compromise their core values just for the sake of extra dollars (they are doing pretty well right now at $250MM in sales annually). I am hoping that the craziness of AA continues to thrive and prosper with its new parents.