On Monday, American Apparel filed for its second bankruptcy protection in 13 months.
The decision came after facing fierce competition and issues with its founder, Dov Charney—whom the company fired in 2014 after misconduct allegations surfaced.
… [American Apparel] emerged from bankruptcy in February under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital LP.
Still, it continued to face declining sales, exacerbated by its costly manufacturing plant in Los Angeles. Under mounting pressure, American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale.
The move also comes months after the company considered a move to North Carolina or Tennessee, and less than a week after American Apparel’s UK team appointed administrators.
The group’s 13 UK stores and some other European operations are not part of the US sale and are therefore likely to be wound down, according to joint administrators Jim Tucker and Richard Beard of KPMG.
Tucker said American Apparel’s US parent had been “experiencing strong retail headwinds” that had led to it halting product shipments to the UK, where the brand was also experiencing trading difficulties.
In the filing, American Apparel “listed assets and liabilities in the range of $100 million to $500 million,” Reuters reported.
Canadian retailer Gildan Activewear offered $66 million for American Apparel’s intellectual property rights and certain clothing stocks. However, Gildan does not plan to buy any of American Apparel’s physical stores.
The bankruptcy filing allows American Apparel to hold an auction for its assets and business under which Gildan’s proposed acquisition would constitute the initial bid.
“Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles,” American Apparel Chairman Bradley Scher said in a letter to employees, a copy of which was obtained by Reuters.
Free download: 13 musts for breaking bad news to employees.
The Wall Street Journal reported:
“We are confident that this decision is the best strategic move forward, in order to preserve the legacy of the American Apparel brand,” Bradley Scher, chairman of American Apparel’s board of directors, said in a letter to employees.
Scher said American Apparel’s day-to-day operations for its U.S. stores would remain the same through its sale.
American Apparel is not the only teenage clothing brand to meet its demise recently.
Reuters reported:
At least eight U.S. teen retailers, including Wet Seal LLC and Pacific Sunwear of California Inc, have filed for bankruptcy in the past two years, as the spending habits of young people shift and they visit malls less often.
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