Popular clothing brand American Apparel has filed for bankruptcy again, amid a history of lawsuits, leadership changes and poor sales, and announced that it has agreed to sell its brand to a Canadian clothing company.
"We are entering an auction process as part of our Chapter 11 filing," the company said Tuesday, a day after announcing its second bankruptcy filing in a little more than a year. "The company has been evaluating several competitive bids, some of which involve interest in retail. We see great potential for the retail business to continue under a possible new buyer during the auction process."
Canadian company Gildan Activewear has offered $66 million to buy the brand's intellectual property rights and inventory, but will not purchase the brand's 193 retail stores.
The company also said that Gildan seeks to maintain manufacturing operations in LA. The brand has a factory in downtown Los Angeles, with more than 5,000 employees, according to its website. The headquarters, along with facilities in Garden Grove, La Mirada and South Gate, are all in Southern California.
In a letter to employees, American Apparel wrote, "Recently, Gildan purchased Alstyle Apparel, which is based in Southern California, like American Apparel. As part of that deal, Gildan continues to employ people in Alstyle's administrative offices and distribution center. Similarly, Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles."
The company's letter also addressed employee concerns about the bankruptcy: "I'm sure you have many questions about what this means for you. In the short-term, there is still work to be done. Everyone will continue to come to work, do their jobs and get paid on each payday. Wages, hours, and benefits will remain the same."
American Apparel filed for Chapter 11 bankruptcy in October 2015, and emerged from bankruptcy in early February with a turnaround plan. However, sales did not bounce back as expected.
According to USA Today, American Apparel chief restructuring officer Mark Weinsten cited unfavorable market conditions in the recent U.S. Bankruptcy Court filing. The company reported a 33 percent decline in year-over-year sales as of Sept. 30. American Apparel lists $215 million in debt this year.
Apart from filing for bankruptcy, the brand has had a rocky history riddled with lawsuits. In 2014, the company fired its founder and CEO Dov Charney after several allegations of misconduct and sexual harassment, and brought in fashion executive Paula Schneider to replace him. Schneider announced her resignation in September.
The American Apparel website states that the average sewer earns about $25,000 per year, or $12 per hour. In April, the downtown LA company laid off around 500 local workers, and started talks about moving some aspects of production outside of the city. The minimum wage in Los Angeles will increase from the current $10.50 per hour to $12 by 2017 and then $15 by 2020.
You can reach Staff Reporter Morgan Chen here.