American Apparel, the teen clothing company which operates the largest garment factory in the US, has filed for bankruptcy protection to clear the majority of its debts and enable a restructure.
The beleaguered retailer, which ousted its CEO and founder Dov Charney last year, said it will continue trading during the bankruptcy process in the US. The reorganisation will see American Apparel's debt fall from $300m to $135m, the company said, and its interest bill will be reduced by $20m a year.
“Throughout the implementation of this process, American Apparel will continue to operate its business without interruption to customers, employees and vendors,” it added. The restructure will take around six months.
"By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy," commented Chief Executive Paula Schneider, who is credited for reviving Warnaco, a swimsuit maker for Calvin Klein and Speedo.
The preppy fashion company hasn’t turned a profit since 2009 and its reputation has been hanging from a thread, but Schneider is doing something about the controversy associated with the brand. Focusing on the ‘edginess’ of it, the 57 year-old CEO is now using American Apparel as a vehicle to tackle social issues such as gay rights and anti-bullying.
The business is notorious for its provocative ad campaigns and Charney’s misconduct but under the ruling of Schneider, it’s becoming more tasteful. “It has to be a little sexy,” said Schneider after American Apparel released a campaign featuring a sloth as its model. “We sell lingerie. We sell hosiery. You just make sure we aren’t crossing the line. It should be about empowering women, empowering people…It doesn’t have to be overtly sexual…There’s a way to tell our story where it’s not offensive.”
Schneider’s priority has been to revamp the business, which she’s previously cited as the reason for the company’s misfortunes. “This is not a brand problem,” she told the FT in July, but an “execution problem”.