The Fall of American Apparel

On Monday, November 14, American Apparel filed for Chapter 11 bankruptcy for the second time. The first time was in the fall of 2015 after the company lost about $300 million from 2009 through 2014, and after the board of directors made the decision to fire the CEO, Dov Charney, for allegations of misconduct in the workplace. At that time, the new CEO, Paula Schneider, began her strategic plan to revamp the company’s image by improving financial performance, launching new designs, growing e-commerce business, etc. American Apparel emerged from bankruptcy in February 2016 but quickly encountered trouble again. In September 2016, Schneider left American Apparel.

American Apparel is unable to overcome years of losses and increased online competition. As of September 30, 2016, the company reported a 33% decline in year-over-year sales. Stores will continue to be open while the company pursues a sale of their operations. Currently, Canada’s Gildan Activewear Inc. is offering $66 million for the intellectual property, some wholesale inventory and an option on manufacturing and distribution assets. This is the highest bid that American Apparel received however, the bid still falls short of the $215 million in debt that American Apparel has. The company has lined up a $30 million bankruptcy loan designed to keep American Apparel operating until the sale closes.

WSJ

Izabela Dzienisiewicz

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