Clothing and accessories retailer American Apparel Inc has ousted controversial founder Dov Charney as chairman, effective immediately, and moved to fire him as chief executive and president following an ongoing investigation into alleged misconduct.

The company’s shares rose as much as 20 per cent in morning trading yesterday.

Charney, who has been repeatedly targeted in sexual harassment lawsuits, will be terminated for cause after a contractual 30-day cure period, the Los Angeles-based company said late on Wednesday.

The company, known for its racy advertising and bright “Made-In-America” clothes, named chief financial officer John Luttrell as interim CEO as it works with a search firm to look for a permanent replacement for Charney.

The retailer, which has not reported a profit in 16 of the past 17 quarters, appointed Allan Mayer and David Danziger as co-chairmen.

Charney, 45, who founded American Apparel’s predecessor companies in 1989, has been at the helm since 2007 when the company went public.

“We believe investors will generally view this news positively, given perceived prior mismanagement and the potential for reduced future headline risk,” Roth Capital Partners analysts wrote in a note to clients.

Brean Capital analysts said they believed the company remained on track, and reiterated a “buy” rating on the stock.

A spokesman for American Apparel declined to comment.

In 2011, a former employee accused Charney of keeping her as a teenage sex slave, fearing she could lose her job otherwise. She also sued American Apparel and its directors for failing to stop Charney from acting as a “sexual predator.”

American Apparel’s shares, which have lost more than two-thirds of their value over the past year, were up 6.2 percent at 68 cents on the American Stock Exchange. The company has a market value of about $110 million. – (Reuters)