Personally, I don't feel that I'd be doing my job as a journalist if I didn't ask a CEO whether ongoing litigation against him will affect the business or cost shareholders money. American Apparel's CEO Dov Charney thought otherwise though (trades on the AMEX under the ticker APP).
First he tried canceling the interview 10 minutes beforehand because I wouldn't promise not to ask him about his sexual harassment lawsuit. After I said that I'm going on air to talk about his company regardless of whether he joins me or not--he finally agreed to join us live.
Afterward he used a few of his now infamous four letter words while screaming at my producer and myself following the interview. He yelled with pointed finger in my face (and I'm quoting) "I know dirty and I know clean and that was dirty!" So judge for yourselves. My transcript of the entire interview is below.
MB: How can American Apparel expand while industry is getting smaller and retail hard hit?
DC: We're very optimistic about the retail environment for our sector. We're basically selling to young international adults in cities like new York or London. They don't own homes, they don't have debt, they don't own cars for the most part, they have no heating oil bill, and their wages are going up not down. We're feeling very strongly about the growth opportunity for us. We also think there can be some real estate opportunities as far as other retailers that cater to the boomers or some other generational markets that are being harder hit. So, we're excited about the go forward opportunities and we're not seeing any resistance to our growth plans.
MB: APP is known for its support of fair labor practices, pro-immigration and for manufacturing in the U.S. Are you going to have to outsource to cut costs now that you are in public markets?
DC: We have a high gross margin to start with. its my argument that by manufacturing in the united states, we're able to control the quality of production and the fluidity of production and it is the least costly option for us. Because we own our own stores and we want to have a perfect composition of inventory on the store floor. that's where we make our money and its well known that we have a high margin. Our gross margins are above 75 percent of our store level. So it wouldn't pay to go offshore to save a few points if you lose the upside opportunity to gross margin. We're looking at tightening up our facilities here in the united states and building stronger infrastructure to execute our business plan even further.
MB: When present to investors, many will ask what headline risk there is with your harassment lawsuit and personal behavior. How tell investors that's not a worry?
DC: I think we have a fantastic business, I think were running it very well, we have a phenomenal management team, and we have not shown any...our sales are in order, we had 27 percent same store sales in Q3 and I think people will be impressed with the manor in which we run our business. I don't see the risk you are talking about but we'll see where it goes. I think we need to get a few quarters under our belt but I think people will be impressed with what were doing and how were making things happen at American Apparel.
MB: The controversial advertising and ongoing lawsuits aren't a risk for shareholders--there won't be a financial cost?
DC: I think we have a fantastic ad campaign and I don't see any problems there. You're asking me about law suits. I don't want to comment on those right now. And there are not a multiple of lawsuits, there is one. But I don't see this as an ongoing risk for us. I think we have a very tight business and we have a lot to offer shareholders.
MB: You've gotten a lot of tabloid heat for your behavior. Is it unfair? Would you like to respond?
DC: Well, there is always a tabloid element in any situation like that. but I think we're doing fantastically well and I'm optimistic about where our business is going and I think our actions will speak for themselves. That's all I have to say.
Personally, I think he handled the on-camera interview well. Off-camera his behavior was certainly not becoming of a CEO. Yelling threats at the business media at an investor conference is certainly not the way to go in my book.
What do you think? Let me know at email@example.com.