Fans of lycra, butts and tube socks, we come bearing bad news: L.A.-based clothing retailer American Apparel filed for Chapter 11 bankruptcy protection Monday morning.
The brand announced the news almost one year after parting with ousted founder Dov Charney, and has agreed to a debt-for-equity conversion deal with lenders (worth more than $200 million), according to
the New York Times
. (Meaning bondholders can swap their debt for shares in the company.)
The brand’s bankruptcy news shouldn’t come as an industry shock, though. Sales continue to fall quarter after quarter, and over the last five years, losses have hit a high of $340 million, according to NYT. The retailer is troubled by a number of different issues, including outrage over its racy ads and an ongoing lawsuit with Charney (who was repeatedly accused of workplace sexual harassment) — all of which have made it difficult to engineer a turnaround.
“Our debt load simply wasn’t sustainable. You can’t do a turnaround plan without cash,” Paula Schneider, the brand’s veteran retail executive, told NYT. “Every day, we would make choices on what we were going to buy, even though we needed more for everyone. Every day, I have to pick between what I’m buying for retail or wholesale, or giving e-commerce enough money to develop a mobile app.”
So what does this mean for American Apparel employees currently working in its 130 U.S. stores? As of Monday morning, there was no talk of layoffs or store closures — yet. And clothing will continue to be made in America, following the manufacturing plan on which the company was founded.
“We will continue to manufacture in America,” Schneider said. “That’s what the brand is. That’s what it’s about.” So don’t worry, you still have time to stock up on your teeny-tiny, mockneck, cutout crop tops — but we wouldn’t wait long.
What do you think of American Apparel’s bankruptcy news? Did you see it coming? Share below!
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