Who destroyed American Apparel?
American Apparel is headed back to bankruptcy court for the second time in a year. The future of the embattled fashion brand/retailer is uncertain, if not downright bleak.
The company has begun to close up shop outside of the U.S., shuttering 83 stores located in Australia, Canada, Germany, Ireland, Japan, Spain and the U.K. A three-month search to find a buyer for the business has turned up only one bid from Gildan Activewear out of Canada.
The $66 million offer made by Gildan is for American Apparel’s intellectual property and some of its wholesale inventory, along with options on its manufacturing and distribution. The deal, if approved in its current form, would likely mean the dissolution of American Apparel since it currently has debts totaling $215 million. The company continues to look for a buyer that will keep its retail stores operating.
As might be expected, founder and former CEO Dov Charney, believes the problems American Apparel is facing are due to the company’s board deciding to relieve him of his duties in 2014.
“The lesson is there has to be some respect for entrepreneurship and management,” Mr. Charney told Bloomberg. “They didn’t respect my management team and creative team. We built an extraordinary business.”
American Apparel, which lost $270 million between 2010 and 2014 and saw its share price fall below $1 at one point while Mr. Charney was in charge, continued to struggle after his departure. The company’s revenue fell $497 million in 2015 and has fallen by a third year-over-year since it emerged from Chapter 11 protection in February.
Mr. Charney, who has disputed allegations made against him, was accused of various acts of misconduct in his role of chief executive at American Apparel. Over the years, press reports about Mr. Charney have contained stories alleging sexual harassment, misuse of company funds and, on at least once occasion, dancing around the company’s office in his underwear.
- American Apparel Returns to Bankruptcy With Deal to Sell Brand – The Wall Street Journal (sub. required)
- American Apparel Founder Says Company Couldn’t Survive Without Him – Bloomberg
- American Apparel CEO to fight firing – RetailWire
- Will new branding turn American Apparel around – RetailWire
- Can American Apparel’s ‘Made in the USA’ model survive bankruptcy? – RetailWire
DISCUSSION QUESTIONS: Who do you think is to blame for American Apparel’s fall over the years? Do you see a scenario in which American Apparel will continue to exist as a retail entity? Is an American Apparel-like model viable in the current retailing environment?