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American Apparel founder eyes European factory as company files for bankruptcy in US
(about 7 hours later)
American Apparel has filed for bankruptcy in the US less than a week after the fashion chain’s UK operation appointed administrators.
Dov Charney is considering opening a factory in London to make T-shirts for his new business as American Apparel, the company he lost control of two years ago, files for bankruptcy in the US.
The filing is American Apparel’s second in the US in just over a year as the once-prestigious brand, which boomed before the financial crisis, failed to recover from years of losses amid more frugal times.
Charney has an as-yet unnamed fashion business with a factory employing about 50 people in the South Central neighbourhood of Los Angeles. He described his new business as “rapid reaction urban manufacturing”, providing fast turnarounds for online retailers and the music industry.
The retailer first filed for bankruptcy in the US in October 2015. It emerged from that in February 2016 under the ownership of a group of former bondholders led by the hedge fund Monarch Alternative Capital LP.
“When Asos need T-shirts they don’t want to run around India or Bangladesh. If Kanye West needs T-shirts, he wants them in his shop [quickly],” Charney said.
But the company’s sales continued to fall and it tried to find a buyer. It has suffered from the wider malaise affecting US clothes retailers who target young people, who are spending less on clothes and shopping less often.
He said as his business develops he may open a factory in London or Paris to be on the ground for his customers in Europe.
The latest bankruptcy filing at a Delaware court showed American Apparel listed assets and liabilities in the range of $100m to $500m (£80m-£400m).
Charney said his policy of manufacturing clothes in the US was viable and that the additional cost had nothing to do with the decline of American Apparel. He said making a T-shirt in China cost only 60c or 70c less than in the US or the UK.
Gildan Activewear, a Canadian clothes manufacturer, said it had agreed to buy global intellectual property rights related to the American Apparel brand and certain assets from American Apparel for about $66m in cash. It would also buy stocks of clothes but the deal did not include any retail stores.
American Apparel has filed for bankruptcy in the US for the second time in just over a year. The brand, which at its peak had more than 200 stores including 18 in the UK, has suffered falling sales. The company’s remaining British business, including 13 stores, went into administration on 8 November.
American Apparel’s image has been beset by lurid allegations against its founder, Dov Charney. His unpredictable behaviour added to American Apparel’s appeal until a series of sexual allegations began to tarnish the brand.
Charney was fired two years ago as chief executive of the company he founded in 1989 while at university. The board accused him of misusing company funds.
Charney, who was fired as chief executive almost two years ago, was alleged to have masturbated in front of a female journalist and reportedly sent explicit texts to employees. The allegations added to unease about American Apparel’s racy advertising, often featuring young female employees.
He accuses a group of hedge funds of taking the company from him and mismanaging it. He said the company used lurid tales of his sexual adventures, including harassment allegations, to discredit him.
American Apparel grew to have more than 200 stores in more than 20 countries, including the UK, where it had 18 outlets when it first filed for bankruptcy last year. Its remaining British business, including 13 stores, went into administration on 8 November. It is likely to close after Christmas.
American Apparel combined sexy, fashionable clothing with ethical production. Instead of making clothes at low cost in Asia, Charney opened a factory in Los Angeles, paid good wages and used “made in USA” as his strapline.
Charney launched American Apparel while at university in 1989, combining sexy, fashionable clothing with ethical production. Instead of making clothes at low cost in Asia, Charney opened a factory in Los Angeles, paid good wages and used “made in USA” as his strapline.
Gildan Activewear, a Canadian clothes manufacturer, has agreed to buy the American Apparel brand and certain assets for about $66m in cash. It would also buy stocks of clothes but the deal did not include retail stores.
The approach worked when the economy was booming and young shoppers were prepared to pay $28 for a T-shirt. But consumers tightened their belts after the financial crisis peaked in 2008, leading to falling sales and rising debt.
