American Apparel files for bankruptcy
American Apparel hopes to become a “stronger, more vibrant company”, despite filing for bankruptcy protection on Monday (05Oct15).
The retail chain has requested bankruptcy protection, reports the New York Times. It hopes by doing so, it will allow the brand to keep its 130 US stores open and continue manufacturing in the country while its debts are exchanged for shares by the business’ creditors.
“This restructuring will enable American Apparel to become a stronger, more vibrant company," CEO Paula Schneider said in a statement, via NYMag. "By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business, and create captivating new marketing campaigns that will help drive our business forward.”
This is despite the fact that the company has built up massive debts recently, losing $340 million in the last five years. In 2015 the business lost an additional $45 million, with sales dropping by 17 per cent in the second quarter compared to last year.
If the court approves the brand’s request, which had been rumoured for months, creditors will take full control and push out current shareholders. This includes founder Dov Charney, who was ousted from his position in June 2014 and replaced by Paula.
While no business wants to file for bankruptcy, by doing so, American Apparel will have the various lawsuits brought against them – many of which involve Dov– put on hold.
The court documents did not mention any redundancies at this stage.