Monday, November 14, 2016

American Apparel Files For Bankruptcy — AGAIN!


American Apparel topples into bankruptcy again


Made-in-the-USA retailer American Apparel filed for Chapter 11 bankruptcy protection early Monday after its latest turnaround plan flopped.
The move comes about a year after the fashion retailer filed for bankruptcy for a first time. The company exited court protection in early 2016 but quickly encountered trouble again.
Canadian clothing manufacturer Gilden Activewear has agreed to a deal to acquire intellectual property assets and inventory from American Apparel, including the chance to maintain some or all of the company's Los Angeles production and distribution operations, according to a court filing.
American Apparel said it hopes to stay in business by securing a deal to keep its stores open. But liquidation is a serious risk for any retailer with the dubious distinction of having filed for what is colloquially known as "Chapter 22" — that is, Chapter 11 bankruptcy for a second time.
The company has already initiated liquidation proceedings for all of its foreign operations.
"The company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated," American Apparel chief restructuring officer Mark Weinsten said in a court filing. "These market conditions were particularly detrimental to retailers."
He said American Apparel's turnaround strategy "completely failed" as the company reported a 33% decline in year-over-year sales as of Sept. 30.
The chain secured bankruptcy financing to keep its doors open for now, but Weinsten said the cash would run out by the end of the year.
In the fiercely competitive teen fashion space, fast-fashion retailers H&M and Forever 21 have bulldozed their rivals in recent years. In 2016 alone, bankruptcies have included Aeropostale and Pacific Sunwear.
But American Apparel's troubles run far deeper. Famous for trumpeting its made-in-the-USA business model and sexually provocative advertisements, American Apparel has flirted with insolvency for years. In 2014, the company fired its polarizing CEO, Dov Charney, who faced allegations of sexual harassment in the workplace.
When it filed for bankruptcy the first time, its strategic missteps were exposed, such as its peculiar strategy of hawking swimsuits in September.
Charney's replacement as CEO, Paula Schneider, charted a new strategic direction for the company, including a plan to overhaul its controversial advertising and improve its products. But she left the company in September.
Since its first bankruptcy, the company failed to optimize merchandising, bolster online sales, improve quality expeditiously and form a cohesive marketing plan, Weinsten said.
With 110 stores in 28 states and the District of Columbia, American Apparel has dwindled in size from the time of its original bankruptcy filing, when it had about 8,500 employees at six factories and 230 stores worldwide.
The company listed about $215 million in debts. It had $497 million in net sales in 2015.
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