American Apparel filed for chapter 11 bankruptcy on Monday, October 5 2015, in order to reorganize the company and still keep lenders invested while setting up a plan to pay back their debt. According to the brand, 95% of its investors are supporting the restructure and are staying on board as lenders. Former CEO and American Apparel founder Dov Charney set the company back when he was fired after a series of lawsuits last December, so it wasn’t completely unexpected for the company to fall into financial distress.
But the issue dates back further than that. According to The Business of Fashion’s website American Apparel has been in rough waters since 2010, and since then has accrued a debt of $338 million, with $92.9 million coming in the first half of 2015 alone. Despite the troubling figures, there seems to be hope for the company yet. The reconfiguration allegedly reduced the debt to $135 million, according to Vogue, which will also cool the burn of interest payments.
With all of the controversy surrounding the brand, there’s no doubt there will have to be a show-stopping reboot of apparel to re-ensnare the hearts of consumers. There may be a lasting fear that links the debt to a downgraded quality – not saying this is the case, but there’s no way to know until the time comes for a reboot.
Losing a founder can be detrimental to the wellbeing of a retail brand, and we can expect to see some changes, from the design aesthetic to the whole refinancing of the corporation. American Apparel needs to really hit the ground running once they manage to get back on their feet for a new line, because you only have one chance at a first reintroduction.
We’ll be expecting large changes from the brand, but it’s hard to know where the changes are going to come, since the company caters to such a wide client base. From kids and teenagers to adults, their designs are far-reaching, so their rebranding could come from any or all directions. There’s no reason to believe one department will undergo serious neglect, since they have a legacy to uphold. “We are the largest manufacturer of clothing in the United States,” the company states on their website.
With such a responsibility, we can only hope American Apparel will wow us with their rebranding. As of now, it may be their only chance at maintaining its prestigious point of relevance in the apparel industry, so it all comes down to the decisions made, and the company’s ability to maintain a stable financial situation over the next few years and on.
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