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August 22, 2011 3:54 PM

Business

The Case for Dov and Eddie

What would fashion do without the heroic and largely unheralded efforts of Dov and Eddie to shake things up?...

What would fashion do without the heroic and largely unheralded efforts of Dov and Eddie to shake things up?

Both American Apparel Inc, helmed by its colorful founder and chief executive officer Dov Charney, and Sears Holding Corp., led by enigmatic chairman Edward S. Lampert, have had a tough go of it in recent years -- and both registered continued losses for the first half.

Neither seem likely to end up on the right side of a Harvard Business School study and, by many accounts, their recent woes are at the very least partially self-inflicted.

But think of their less-than-obvious contributions to the retail narrative over the past few years.

Charney, of course, is a grand master of brand building and publicity, but he's also been a high-profile advocate of U.S. production. Many see that, and the reliance on basics, as American Apparel's problem.

The economics of the market means the odds are stacked against U.S. apparel manufacturers -- which cut payrolls to 152,900 in July, a drop of 3,800 from a year earlier, and the latest in a long string of declines.

But is the concept of U.S. production dying outright? Is there no hope?

Despite all of its troubles with the Feds and illegal immigrants and shaky finances, Charney's American Apparel keeps bringing the question of U.S. production to the fore. In a complete reversal of the status quo, American Apparel stitches T-shirts in Los Angeles and sells them at its own stores in Beijing and Shanghai.

Somebody out there is or should be learning from Charney, following his moves, avoiding his mistakes.

And Lampert, the hedge fund operator who combined Sears and Kmart, has held his ground when it came to spending on his stores.

In his annual letter to shareholders in February, Lampert said, "The company generates significant amounts of cash, and we have the ability and flexibility to invest that cash strategically. We will continue to make long-term investments in key areas that may adversely impact short-term results when we believe they will generate attractive long-term returns."

Lampert tapped a former IBM executive to run Sears and some think he's going to use that cash to at least try to build the next great Internet business. Others, in the words of Matt McGinley, an analyst at International Strategy & Investment, see a "zombie retailer" that invests $1.50 to $2 a square foot in its stores annually, when it should spend $6 to $8 just for maintenance expenditures.

Whatever Lampert's plans for Sears are, there's a debate to be had on how retailers spend their money and Lampert, though he rarely makes public comments, seems to be the only one talking. Before the 2008 crash, big retailers all spun the tale about how they spent so efficiently, but cost cuts during the downturn showed there was plenty of fat to trim.

I mourn, a little, for each of Charney and Lampert's retail failures.

They might not always be right or wise, but who is? And they're doing something different. In that, they're leading the way.

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