Dov Charney

Dov Charney’s running late.

He’s apologetic. He calls to make sure the reporter waiting for him has enough to do until he arrives. Not long after, he calls again to suggest a self-guided tour of his South Central factory before finally asking his appointment to wait for him in his office.

Inside his working space — which doubles as his living quarters — there’s a heart-shaped Mylar balloon, an E.T. stuffed animal atop a bookshelf, a mattress in the corner and loads of invoices, color swatches, letters and notes to self hanging from the walls.

Los Angeles Apparel is employing 300 workers, sometimes 400 during the peak, warm weather months when concerts are in full gear. The business has three divisions: imprintables, private-label manufacturing and direct with an online shop quietly launched last year. The company, though still in its nascent stage, is running a valuation of somewhere between $40 million and $50 million, potentially more, the chief executive officer estimated.

When Charney, forever juggling multiple thoughts — ranging from manufacturing and cultural movements to free trade and fabric weights — comes barreling in, he’s moving at warp speed, taking calls, glancing at news alerts on his phone and having side conversations with employees walking past his office, as he carries on an interview.

Before the first question is even lodged, Charney’s wound up with an elevator pitch on the merits of domestic production. Here, an edited version of his conversation with WWD:

Los Angeles Apparel

The Los Angeles Apparel factory.  Kari Hamanaka

Dov Charney: The supply chain is getting truncated because in some cases we’re cutting out the importer. In some cases we’re cutting out the brand that resells to the retailer. What I’m saying is you could have a local manufacturer go direct.…So the retailers can start to go to smaller, local manufacturers themselves, do shorter runs. It’s micro-production, rapid reaction manufacturing.

Take a recording artist where they do these flash sales online for a sweatshirt or a T-shirt and they want it quickly manufactured, printed and shipped. This [manufacturing model] could instigate a lot of opportunity for local manufacturing and what I’m planning to do is become the center of that. It’s a refined version of what I’ve done in the past. I think now it’s more clear to everyone this is a huge opportunity.

WWD: It’s a refined version from what you did in the past because of your use of technology?

D.C.: Well, I think now it’s much more obvious people aren’t frightened [to manufacture domestically].

The problem with local manufacturing is it’s fractured, it’s undercapitalized [and] it’s hard to finance. There’s all of these barriers. I’m trying to get past all that, knowing we’re going to be paying $15 an hour is just the beginning. There’s still taxes on top of that. Really, my labor costs are going to be $20 [an hour].

WWD: You’ve been relatively quiet, except on social media, where you’re building the brand. What sort of traction have you been getting there?

D.C.: I think social media’s a lot harder than it was because Instagram, they want you to pay to play much more. When we were at my previous company [American Apparel], I was able to scale that a lot better because there were no restrictions. If people were following your feed, you put up an image and they were absolutely going to see that. Now there’s a huge amount of content out there. Not everybody gets to see your content.

I’m going to overcome that challenge but it’s hard. It’s not hard like, “Oh my, God, crybaby.” We’re going to handle it.

WWD: Who are some of your customers?

D.C.: I’ll get back to you on which ones are OK, but a lot of major brands.

WWD: Well, what industries are they coming from? Are we talking about the action sports/streetwear space?

D.C.: That’s a very strong area.

WWD: You mentioned challenges to obtaining capital for manufacturing. What are you hearing from the finance industry as to why there isn’t interest?

D.C.: There’s no money for the equipment and capital financing. There’s not enough money for the apparel industry. One of the reasons China’s getting the orders is — or Vietnam or elsewhere — is they have the equipment in many cases that’s not available here. The industry’s undercapitalized, but no one wants to finance it.

 

Los Angeles Apparel

Workers at Los Angeles Apparel.  Kari Hamanaka

WWD: The last time you and I talked, you were considering crowdfunding. Did you do it?

D.C.: I didn’t.

WWD: What’s keeping you on the fence?

D.C.: We still may do it. It might be a huge opportunity for those who want to invest in it. We’ve been relying to date upon private investors. Most of our investors are foreign. From Italy, from Canada, from Korea, Central America. They realize that’s going to be a force within the United States. It’s a contrarian bet.

WWD: Why do they get it, but we don’t here in the U.S.?

D.C.: I think people do get it here. I don’t have a huge sample of investors. It’s just the people that I connected with. We have some American investors, but we’ve seen 40 years of relentless outsourcing to the point that manufacturing’s bare, but clothing products are huge.

Everybody wears clothes. All over the United States. How many people didn’t wear clothes today? Who walked around naked for the last 72 hours in the United States that had to go out of their homes? There might be — nobody.

There’s no data on it, but clothes are a big element of consumption. We consume clothes and there’s no clothing manufacturing in the U.S. There is, but it’s limited as transportation costs go up.

Also, online shopping. Ross Dress for Less doesn’t do much business online, I imagine. It’s more you go to Ross to hunt through and you look for discounted merchandise. Discounts you need to see and feel. What sells well online: It’s an iPhone 7! It’s an iPhone 8! IPhone 9! IPhone 10! It’s something that you know what it is.

WWD: So do you need to start pushing out physical stores then?

D.C.: Yes, actually. I’ve got to do that.

I think physical stores are important now as marketing vehicles. I had people [in the past with American Apparel] who said, “Well, you should have consolidated stores in the United States more than having all these foreign stores, like one store in Barcelona. What were you doing that for?”

I had only two stores in Spain. It was a very wide-ranging number of stores across the globe, but it was a very good strategy that I hope to take. I did have some concentrations in a few cities like New York and Montreal, but that’s not the future. What the future is, is that they’re showcase points for the brand, whether they’re pop-ups or physical stores or an airport store.

WWD: How far off is physical retail for you?

D.C.: I think we’re going to have to try something within the year.

 

Los Angeles Apparel

Los Angeles Apparel  Kari Hamanaka

WWD: Everyone is talking about authenticity and experiential retail. Yes, the conversation was had when you were at American Apparel, but not to the degree we talk about it now. So do you think about that as you’re set to launch retail and do you feel like you need to have — not necessarily VR in stores — but is there pressure to up your game?

D.C.: I think we were ahead of our game on that. With American Apparel, first of all, we were a brand that didn’t sell to other stores. We never had the retailer. We had some. We had a store-in-store in Galeries Lafayette, but it wasn’t like we were selling other stores. In that sense, we could be irreverent and highly authentic. I think I have a very high-octane level for authenticity. That’s not my weak suit, you know?

If you look at my own Instagram feed, which for my own self interest, I would ask you to reference but you don’t have to, the thing is, it’s street scenes. It’s stories about workers. People are interested in the stories about the workers. They want to know how it’s made. There’s this whole maker movement. American clothing manufacturing has been following Champagne [production]: “We’re Southern California. We rule casual. We know the T-shirt. OP started here. We’re Orange County. We’re Los Angeles. We’re San Diego. We’re Santa Barbara.” But, we don’t make it here. It’s not really authentic.

We’re really making T-shirts here and people like that. It’s not just a tech pack sent to China and coming back.

What I’m trying to do is become a production house, but the challenges are basically financial more than anything else.

WWD: How crucial to the business is the need for financing in the near term?

D.C.: We’re going to have to figure out a way. Crowdfunding is totally an option that we’ve looked at, but there’s reporting requirements. There’s some transparency that you have to offer to the public, which eventually gets into the hands of your competitors.

WWD: OK, we’re talking about Reg A+ [a mini-IPO process allowed under the Jobs Act] here and not a Kickstarter campaign?

D.C.: One could do a Kickstarter. Look, for everything, there’s a reason why and there’s a reason why not. Kickstarter, it takes away the mystery a little bit. It’s all about a gimmick. You know, “This is the new phone holder” or “Check this one out: It has a pocket and it has a watch and it’s biodegradable and anti-bacterial…and it’s going to get you a new girlfriend.” There’s all these great things it’s supposed to do.

We’re saying, “No, these are just very mundane.”

To reinvent mundane, that’s important. People want mundane. People want a really good cotton T-shirt as dumb and mundane as that is, not “Oh, it’s a new tech fabric.”

Los Angeles Apparel

Dov Charney estimated a physical retail presence for Los Angeles Apparel within a year.  Kari Hamanaka

WWD: As it relates to funding, critics in the past have accused you of racking up too much debt.

D.C: I wish I had all that debt because that debt was not cash debt.

Everybody babbled so much because it made sense in the 24-hour news cycle: “Oh, il était méchant terrible. He was a bad boy. He was a terrible boy. He took too much debt. He overexpanded and here he is slinged in the a–.” But had I done the equity model, I probably wouldn’t even have made it to 2014 because I would have sold too much equity too quickly. Debt is better. It’s cheaper.

WWD: You mentioned earlier your previous company and some people suggesting consolidation of the retail…

D.C.: My brand was well-known on a global basis. I plan to do that again and almost all of my stores were EBITDA-positive [earnings before interest, taxes, depreciation and amortization] as we’ve discussed many times before. I’m not wanting to rehash that whole movie. What I’m saying there is forget what happened. Let’s talk about what went well and what one would want to duplicate, which is to have all these nodes like in London. It has to be a place they can go see it [the product] and they don’t even need to come again. At the store you’re almost happy if they want to buy it online. All you want to do is connect with them.

WWD: Does it not matter then to you this time around if the stores are necessarily profitable?

D.C.: It does, although mine [at American Apparel] were, which is a sad story for me. I’m a little bit old-school. I come from a time where everything’s supposed to be profitable or you shouldn’t be doing it.

I do think if you have a really well-capitalized start-up, they could actually lose money and justify it. Like Uber. The news media doesn’t do anybody any favors in many cases — often they do, but the modern media of the last five, six years is very click-baitish, right? The problem is a lot of the stories get siphoned down to what people really want to be entertained with, rather than deep “Frontline” PBS investigative reporting.

But remember the news cycle that Uber was losing money and all this stuff, but we were all in Uber anyways!

If I had Uber at the time I was staying at [the former American Apparel] La Mirada [factory], I would have gone home every night.

WWD: Why don’t you take Uber home now?

D.C.: I actually like being here for my own reasons.

WWD: Because you keep a pulse on everything?

D.C.: Right, but I really enjoy being in here on a Sunday. This is a nice building. This is much nicer than La Mirada. This could be a residence. It’s skylighted. There’s a supermarket within 100 yards. There’s culturally relevant retail that’s intriguing. I’m not suffering being here.

The idea of having spread retail, to touch the consumer in every part of the world, is important and if these stores aren’t profitable, a lot of people like to finger-wag in the apparel industry because it’s a poor man’s industry. I know there’s the Lululemons of the world and there’s the Guesses of the world but, really, in its infancy, it’s a struggle. It’s an industry that was always undercapitalized. It was immigrants that got into the apparel industry. It wasn’t a WASP-y trade where the elite were.

But if we step back, losses can work and you still have to value the company. We’ve learned a lot in the last 20 years. I think Jeff Bezos proved it. Google. Facebook.

We look at where [a business] was as some indication of where it might be going, but let’s supposing it’s 2005 and you can predict, and we know we’ve had a lot of great successes with shopping centers. I found a documentary. It’s a 1985 CBS piece on the rise of the shopping center. It’s fascinating. They went to a shopping center conference in Vegas and everybody’s talking about productivity by square foot and people are going to the shopping center — it’s a new meeting place. It’s spiritual. People live out their fantasies. And now we see it collapsing. Now they’re trying to repurpose the shopping center.

Los Angeles Apparel

Inside the Los Angeles Apparel factory.  Kari Hamanaka

WWD: Do you believe in the future of malls?

D.C.: I think they can be repurposed, but there’s definitely no place for more in the country. You can leave one or two, but there’s room in this world for maybe one more South Coast Plaza. It’s kind of like an anachronism but it survives.

The past isn’t really telling of the future. What we had at American Apparel, and I hate to get into it, it was amazing.

But when you write an essay a second time — you ever lose an article you wrote? Have you found usually the second one is better? Initially, you’re really frustrated and depressed that you lost the file. “I just finished the article. I don’t remember what I wrote. I’m so tired.” And then you rewrite it and sometimes it’s better.

WWD: Sometimes.

D.C.: I think generally sometimes it is, you know? The only thing that I worry about, the only risk factor is age, because you only get so many years to play and I’m 49 right now. I plan to work till my death point and some of my grandfathers have. My grandmother was working until the end of the family business. She was in her early 90s. I have two decades and maybe we stretch it to three decades. I wish I could stretch it to 500.

Right now, whatever happened, happened. I have to build a world-class business. I think academics are important. Seeing where things are going is important. I think you know these neighborhoods, whether it’s East L.A. or South L.A., are on the rise and the Westside neighborhoods are challenged.

WWD: Challenged how?

D.C.: The core of the city has moved east.

WWD: And do you include downtown when you say east?

D.C.: The pendulum of power has swung. Downtown Los Angeles is more interesting [than the Westside], but then it got gentrified and some of the ways it got gentrified were a little bit foolish. I do think there’s going to be money as Echo Park really took off. Koreatown is still on. Westlake is still on. East L.A. is still cool, but what’s happening is we’re going to want to be less and less in the car and more and more have sophisticated locations close to our work and not have long commutes.

But there’s a whole reversal to this thing of “Oh, retail is over.” Well, no, it’s not over because customers do want to touch fabrics. They do want to try things on. I can show you two garments made of the same yarn, the same weight, but they fit differently because of the way one was knitted or it has less shrinkage or the chemicals it was treated with.

These things are going on and I’m trying to crawl and figure this all out and I do think some of the challenges right now is I think the fashion industry is in a real weird place culturally.

WWD: With respect to the #MeToo movement, does it make you cautious about how you work or how you approach advertising?

D.C.: Like other movements, the #MeToo movement is part of the marketplace of ideas, which I believe must continue to remain unrestricted and free. Invariably, I believe the movement will evolve and re-evolve and I look forward to its evolution and revolution as it intersects with our industry.

The key is that everyone and every company gets to express themselves freely.

WWD: Switching gears: Are you profitable right now?

D.C.: No. Not even on an EBITDA basis.

WWD: Are you close?

D.C.: We’re approaching it.

 

Los Angeles Apparel

Inside Los Angeles Apparel.  Kari Hamanaka

WWD: Do you feel a certain pressure as though the clock’s ticking? American Apparel is obviously in business and they mentioned on their Instagram about starting up brick-and-mortar soon.

D.C.: I do think it’s competitive. It is competitive.

WWD: Does it make you nervous?

D.C.: It doesn’t and it does. Don’t forget, if they do it and they do it poorly, it may also accelerate my growth.

WWD: Sure.

D.C.: That’s why it’s important that I accelerate a little bit. Yeah, a little bit it’s going to be a war, but I don’t know how good a job they’re doing. We’ll see how they go.

WWD: If you go to American Apparel’s Instagram feed, some of the comments are in the vein of “Oh, so cool you’re back,” “When are you coming back to Canada?”—

D.C.: Yeah, I saw that comment. You spoke to it almost verbatim, but also there’s people saying “Hey, you guys moved it offshore.” So there is an awareness that this isn’t authentic.

WWD: But for those people who are saying “That’s so great you’re back,” what is the story you tell to explain the difference between Los Angeles Apparel and American Apparel?

D.C.: They’re not American Apparel. They’re literally not. The workers are gone. The stuff’s not made in Los Angeles.

WWD: OK, Dov, last question. What keeps you up at night, aside from the fact that you live in a factory?

D.C.: I lost everything. I have to finance a business going forward and it’s complex. I have to finance it in such a way that I don’t lose control or the company doesn’t get hijacked by institutional forces. Not having to share control with an institutional investor is key because we’re going to do things that certain institutional investors will see as too risky, such as investing in particular automation equipment, opening stores, hiring photographers that maybe institutional forces don’t want us to hire or creatives or artists, or putting out product maybe that they don’t like. We have to be independent, forward-thinking — contrarian thinking — different, passionate and, of course, ethics are important. But it’s not superficially ethical. It’s fundamentally cutting and pursuing a different path.

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