American Apparel Sold in Auction after Declaring Bankruptcy Twice in One Year

Posted on Friday, March 3rd, 2017 at 7:46 pm    

The once-iconic brand, emblematic of LA youth culture and “Made in America” pride, is closing its doors for good. Once the bread and butter of hipster styles and simple, counterculture fashion, American Apparel has been bought by Gildan: a Canadian active-wear company.The deal cost Gildan 88 million dollars.

At its prime, American Apparel generated $633 million in sales and had over 200 stores in 20 different countries. The company’s refusal to outsource American manufacturing jobs to cheaper labor and a steadfast sweatshop-free ethos created a loyal following throughout its time in operation. Created in former founder Dov Charney’s college dorm room in 1989, the company quickly grew to be a household name in retail through its trendy, American-made manufacturing and sexually provocative marketing campaigns. Despite its success, the company faced internal problems for the past few years, not limited to sexual harassment lawsuits aimed at Charney, employee anger at questionable labor practices, drops in sales, and huge debts coupled with costly legal battles. Charney was eventually ousted from his own company and American Apparel subsequently declared bankruptcy twice in one year.

Also attributable to the company’s demise were changing consumer tastes, the decline of brick-and-mortar success brought by the rise in online retail, and competitive pricing by similar brands such as Zara and H&M. Gildan purchased American Apparel’s intellectual property and manufacturing equipment for $88 million, as well as its purchase orders and inventory for $15 million. However, American Apparel’s stores were not included in the Gildan deal and the closure of its retail stores and manufacturing plants will lay off roughly 2,400 employees.

The end of a successful business is painful for owners, employees, and consumers alike. At the Bradford Law Offices, PLLC, our knowledgeable business bankruptcy lawyers represent struggling businesses that have looked to bankruptcy for financial relief. If you are experiencing financial turmoil in your company, contact our Raleigh offices at (919) 758-8879 for support and guidance in your case.