Made-in-the-USA retailer American Apparel, LLC and its affiliated entities (“Debtors”) filed for Chapter 11 bankruptcy protection on Monday, Nov. 14th for the second time in just over a year, colloquially known as the “Chapter 22”. The filing comes just about a year after the fashion retailer previously filed for bankruptcy, when the company exited court protection in early 2016 but quickly encountered trouble again.
Canadian clothing manufacturer Gildan Activewear has agreed to a $66 million deal to acquire intellectual property assets and inventory from American Apparel, including the chance to maintain some or all of the company’s Los Angeles production and distribution operations, according to a court filing.
According to chief restructuring officer Mark Weinstein, “[t]he company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated. These market conditions were particularly detrimental to retailers.” According to Weinstein, American Apparel’s turnaround strategy “completely failed” as the company reported a 33% decline in year-over-year sales as of Sept. 30. Since its first bankruptcy, the company failed to optimize merchandising, bolster online sales, improve quality expeditiously and form a cohesive marketing plan, according to Weinsten.
With 110 stores in 28 states and the District of Columbia, American Apparel has dwindled from the time of its original bankruptcy filing, when it had about 8,500 employees at six factories and 230 stores worldwide. The company listed about $215 million in debts. It had $497 million in net sales in 2015.
The First Day Hearing is today (11/15) at 9:00 a.m. The bankruptcy proceeding has been assigned to the Honorable Brendan L. Shannon.
Carl D. Neff is a partner with the law firm of Fox Rothschild LLP. You can reach Carl at (302) 622-4272 or at email@example.com.