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LOSSES MOUNT FOR AMERICAN APPAREL AS EXIT PLAN IS FINALIZED

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By Daphne Howland from retaildive.com

Dive Brief:

  • American Apparel is facing further losses as it approaches the deadline for its chapter 11 restructuring plan, which was approved last week by a judge over an alternative offered by investors backed by founder Dov Charney. Its $90 million exit plan must be approved today or the company will have to find new financing, the Wall Street Journal reports.
  • The retailer reported Q3 losses of $25.6 million Monday, up significantly from the $19.2 million losses from a year ago. Q3 revenue fell 19% to $126 million.
  • Meanwhile, Women’s Wear Daily reported that Charney and investors backing him up say they are working on developing a new made-in-the USA apparel retail company that sounds remarkably like American Apparel.

Dive Insight:

Assuming all goes as planned, American Apparel will finalize its restructuring plan and get on with life soon, but in a weakened state. The retailer is facing an even bleaker picture than ever. And, while it has consistently counted the forced departure of its founder as a factor in its favor, the company has failed to show that can replace his vision and creativity with something as compelling.

Charney himself appears to be finally moving on (although its remains to be seen whether that includes holding off on further litigation against American Apparel, which he has previously promised to continue).

The plans for his new retail company, forged with the same investors who had attempted to help him reclaim American Apparel during this bankruptcy round, sound much like the foundation of American Apparel itself-basic apparel, made in the USA.

What that means exactly is hard to know-will Charney manage to woo away some of the factory workers or others at American Apparel that reportedly have stayed loyal to him? Is his idea to replicate the essence of American Apparel or to forge something new? (Charney has not responded immediately to a request for more details.)

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