To the surprise of no one, The New York Times reported on Monday that the long beleaguered American Apparel has filed for bankruptcy.
The deal… would enable American Apparel to keep its manufacturing operations in Los Angeles and its 130 stores in the United States open, the company said. No layoffs were announced in the filing, which still requires approval by the bankruptcy court. The retailer’s overseas operations are unaffected by the restructuring, which American Apparel expects to complete within six months. Still, the bankruptcy would wipe out American Apparel’s current shareholders.
Company CEO Paula Schneider said in a statement that the move should ease some of American Apparel's financial struggles. "This restructuring will enable American Apparel to become a stronger, more vibrant company… by improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy, she said. Overall, the move should reduce American Apparel's debt from $300 million to around $135 million.
It's no surprise that American Apparel is in trouble. The company has been steadily losing money for years, and the numerous allegations against founder Dov Charney have taken a toll on the company's reputation and finances. American Apparel's board ditched Charney out last year, but their problems extended beyond the toxic association.
USA Today pointed out that the retailer was also making some nonsensical choices, like trying to sell bathing suits in the fall and failing to prioritize online sales. Plus, teens are out on American Apparel, opting instead for retailers like Forever 21. Which is where we'll be going for our backless long-sleeved mini dresses from now on.
Danielle Wiener-Bronner is a news reporter.