American Apparel Faces Bankruptcy, Dov Charney Speaks

[silk skin paws]

I don't think anyone started a topic about this.

http://www.huffingtonpost.com/2010/08/17/american-apparel-bankrupt_1_n_685069.html


Hipster clothier American Apparel is on its way to bankruptcy, WWD reports. American Apparel, Inc. announced that both weak business and loans "raise substantial doubt that the company will be able to continue as a going concern" and that "the company may not have sufficient liquidity necessary to sustain operations for the next twelve months."


American Apparel's second-quarter losses will be somewhere between $5 million and $7 million after a terrible first quarter. According to the New York Times, shares in American Apparel have fallen more than 66 percent over the last year and that overall, the company has more than $91 million in debt. The SEC is threatening to de-list American Apparel from the stock exchange if it doesn't file its quarterly reports by Tuesday. Jezebel got in touch with CEO Dov Charney Tuesday afternoon to see if the results were filed and he responded, "I couldn't tell you."


Charney also spoke with BusinessWeek.com at the beginning of the month. He said, "A lot of assumptions that I grew up with are no longer reality. Those were things that we could rely on: that lenders will always be there, that they'll behave ethically and they'll always have money, that you can trust that as the sun comes up the consumer will be healthy, that we'll always be close to full employment in developed nations. Now there are no certainties."


In any case, Charney--and American Apparel--are moving away from "hipsterdom." He spoke with the Village Voice, remarking, "Hipsters are from a certain time period. The stereotype of a hipster is not something people aspire to anymore. Do you want to be a hipster? Nobody wants to be a hipster." The company is moving toward a preppy aesthetic, Charney said, explaining, "It's hard to put into words--it's about emphasizing products that we have. Our pieces are timeless."

 

[KhaoticKharma]

I know they're trying to take a more "classic" approach (as evident in the major makeover that both their merchandise and staff dress code recently underwent), but at this point, I think the damage is done. I will never go to American Apparel for a blazer or a skirt; I associate them with bare bones basics and hipster gear. With the economy the way it is, why would I pay $20 for a t-shirt at American Apparel when I could spend less than half of that at Target for a shirt of similar quality? I suppose the "hipster gear" isn't moving all too well either these days. So none of this really surprises me.

 

[Erin]

Well, I'm not a hipster but I could wear a good amount of their clothing.

But, to me their quality has never been better than anybody else's. Two of my four cotton tees have holes in them - where's the quality in that?? And I hadn't even worn them many times before...

And AA grew too wide, too fast... they opened up quite a few stores in a short amount of time. Reminds me of Starbucks, and how they had to go back and close some down.

 

[silk skin paws]

It seems like American Apparel crafted this niche which didn't leave much room for expansion. I like the idea of sweatshop free clothing but they couldn't compete with other cheaper or equivalent competitions. Plus they banked on a trend and trends fade or don't last very long.

 

[Kimkhuu]

Good news.

No more sexist AA ads.

 

[Scott]

i find that last comment by charney rather hilarious,if not a bit arrogant....."our pieces are timeless" i'm sorry,what?! timeless is something one refers a beautiful designer staple to....or an extraordinary vintage piece. timeless is hardly something i equate with AA.

it's no different than anything else....it's disposable fashion.

as for this bankruptcy,i'm not so surprised really. i think that place,as accessible as it is,offended a lot of people with it's sleazy advertising. and the products aren't exactly the epitome of quality. also,their range has always been a rather limited in that did mostly jersey basics and crappy 70's and 80's cheese-mill stuff that you can easily find in a salvation army...it was hardly the emporium of option. i also feel like erin...when you expand and grow that rapidly,it comes across not as ambitious but slightly obnoxious....people don't always want that sort of stuff shoved down one's throat. i just think they try too hard to force their brand of dressing a bit too much. it's the total opposite of H&M's business model seeing as they not offer more but they also opened its doors according to the level of response from customers and fans.

 

[Erin]

For those following this, an article in the New York Times from a few days ago:
American Apparel Shares Fall as Woes Rise

 

[YoninahAliza]

Honestly this doesn't surprise me at all, AA never had good quality clothing nor did they leave room for themselves to change with the times. Plus their sexists ads turned off a lot of people I think from buying their clothes anyways.

 

[mcnuwave]

oh.my.god.

i will say that the quality of some of their stuff was lacking, the fit of their tops are impossible to beat! Great! Where will i go now?

 

[Echoes]

By Tom Hals and Alexandria Sage

WILMINGTON, Del./SAN FRANCISCO | Fri Sep 3, 2010 9:38pm EDT

WILMINGTON, Del./SAN FRANCISCO (Reuters) - Hipster brand American Apparel Inc (APP.A) is in talks to bring in an outside restructuring firm as the manufacturer and retailer struggles to fix its flagging operations, sources told Reuters on Friday.

Lender Bank of America (BAC.N) pressed American Apparel to hire the firm, a specialist in corporate turnarounds, according to people familiar with the matter. The firm is not being brought in to arrange a bankruptcy, sources said, but to help improve operations and its financial condition.

The firm has been meeting with eccentric American Apparel founder and Chief Executive Dov Charney and his executives, but did not want to be identified because it has not yet formally signed an engagement letter for the job, these people said.

American Apparel, known for its "Made in USA" clothing, socially progressive stances and racy advertising, has long been criticized for lax financial controls and a lack of strong senior management. The outspoken Charney is seen as a brilliant creative mind, but who is struggling as he juggles the myriad problems befalling the company.

People close to the matter said American Apparel still had plenty of room to maneuver to fix its fiscal woes, and while the situation was serious, a bankruptcy filing was unlikely, at least for now.

http://www.reuters.com/article/idUSTRE68308T20100904