Retailer of clothing and accessories American Apparel Inc removed founder Dov Charney from chairmanship and initiated the process of sacking him as CEO and president after an ongoing probe into alleged misconduct.
The company’s stock soared as high as 20% in Thursday’s early trading.
Charney, who has severally been sued for sexual harassment, will be sacked for cause after the expiry of a 30-day period for conflict resolution, the firm said late on Wednesday.
Chief Financial Officer John Luttrell was named interim CEO as the company engages a search firm to find a permanent Charney replacement.
The retailer, which has not posted profit in 16 of the prior 17 3-month periods, put Allan Mayer and David Danziger to the positions of co-chairmen.
Mayer said that although the company took no delight in the developments, its board deemed it the right way to go about the controversy, according to Reuters.
Charney, who is 45 years old, founded companies that came before American Apparel in 1989. He has headed the company since 2007 when the firm went for its first IPO.
Charney controlled a little over 27% of the retailer as of April 21.
“We believe investors will generally view this news positively, given perceived prior mismanagement and the potential for reduced future headline risk,” analysts from Roth Capital Partners stated in a note to clients.
Analysts from Brean Capital said they were convinced the retailer remained on a recovery path and reaffirmed a “buy” rating on the shares.
The Los Angeles-based manufacturer of casual clothing posted a net loss of $5.5 million for the quarter that ended March 31, smaller than the $46.5 million loss recorded the previous year, the Wall Street Journal reported.
The firm has had difficult financial times over the years, almost violating loan covenants. American Apparel said in late January that it refinanced the bulk of its debt.
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To contact the reporter of this story; Yashu Gola at email@example.com