American Apparel has Filed for Bankruptcy
After struggling for years, American Apparel has filed for bankruptcy. According to Reuters, the company has not profited since 2009. The clothing company, which originated in Montreal and is known for their sexually charged adverts, now joins the list of retailers that are struggling to keep up with fast fashion retailers such as Zara, Forever 21 and H&M.
A spokesperson for American Apparel said its manufacturing operations, the company is one of the only clothing retailers that still manufactures in the United States, and its stores will continue to operate normally though they are restructuring under the conditions of their secured lenders. If all goes to plan, the company will cut their debt from $300 million to $135 million through the elimination of over $200 million of bonds in exchange for equity. The restructuring is said to be completed in approximately 6 months.
The move doesn’t shock us much. The company has been in trouble for a while. Dov Charney, the founder and CEO of the company, was fired in 2014 following a number of sexual harassment accusations and lawsuits. Shortly after, the company announced they would be closing a number of their North American stores and letting go staff. American Apparel and their new CEO, Paula Schneider, even admitted their future looked bleak, stating that, “even if American Apparel increases revenue and cuts costs, there can be no guarantee that the Company will have sufficient financing commitments to meet funding requirements for the next twelve months without raising additional capital, and there can be no guarantee that it will be able to raise such additional capital.”
Are you surprised that American Apparel has filed for bankruptcy?
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