American Apparel files for bankruptcy protection
06.10.2015 378 views
The clothing chain’s tumultuous decline includes marketing controversy and a legal battle between founder Dov Charney and the board.
American Apparel Inc., the made-in-the-U.S.A. clothing chain known for provocative marketing and boardroom drama, filed for bankruptcy protection after years of losses and a feud with controversial founder Dov Charney.
As part of a prearranged Chapter 11 restructuring, the Los Angeles-based company will reorganize its debts, which have ballooned to levels exceeding its assets. More than $200 million of bonds will be exchanged for stock in the reorganized company, according to a statement on Monday. American Apparel, No. 330 in the Internet Retailer 2015 Top 500 Guide, will remain in business during the process.
"It is business as usual at American Apparel and we are as excited as ever to bring you great fashion basics. Our stores are open, e-Commerce orders will continue to be fulfilled, your gift cards will still be honored, and all of our standard policies regarding returns, exchanges, etc., will remain in effect," American Apparel's digital and retail teams said Monday in an email to customers.
Filing for bankruptcy is a “difficult decision that gives American Apparel the opportunity to rebuild the business,” said Bryan Roberts, an analyst with Kantar Retail. “Quite a few U.S. retailers have gone down this route and come out the other side.”
The move follows a clash between Charney and the board that led to his ouster last year for alleged misconduct—claims he says are baseless—but American Apparel’s financial woes stretch back longer. The chain has posted deficits every year since 2010. Chronic losses strained its balance sheet to the point that, as of end of June, American Apparel had $161 million more liabilities than assets, meaning the company had a negative book value. Its web sales drop to an Internet Retailer-estimated $62.1 million in 2014, down 1.5% from $63.0 million the year before.
Source: Internet Retailer