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American Apparel is Preparing to File for Bankruptcy for the Second Time in Two Years

Posted on in Corporate Bankruptcy

American Apparel is Preparing to File for Bankruptcy for the Second Time in Two Years

American Apparel Inc., a casual clothing brand known for the domestic production of its products, is preparing to file for bankruptcy protection. This would be the second time the company filed for bankruptcy in two years. Its most recent bankruptcy was filed in October 2015 and by February 2016, the company emerged under new ownership by Monarch Alternative Capital. With this new leadership, the company refocused on its basic items and sought restructuring guidance from Berkeley Research Group.

These changes could not save the company's bottom line, though, and again the company is looking to restructure itself through bankruptcy. With American Apparel, like many other poorly performing companies, there is not just one issue hurting profits. American Apparel is competing in a crowded, changing sphere of the market while attempting to tackle its internal problems, such as the dismissal of its CEO following a misconduct scandal in 2014.

A Difficult Decade for Clothing Retailers

American Apparel is not the only popular clothing retailer that filed for bankruptcy within the past few years. Aeropostale and Quiksilver, two brands that could be found on outfits across America through the 2000s, struggled to stay relevant in the 2010s. Fast casual retailers like H&M and Forever 21 cut into their market share as Americans shifted their spending habits after the 2008 recession. Today, young Americans are more likely to spend money on technology and experiences, rather than clothing.

An Uncertain Future for American Apparel

Although two bankruptcies in two years can look like a sign of a bleak future, American Apparel hopes to recover by making drastic changes. Currently, it has over 200 retail locations. Although some potential buyers are not interested in these and instead only want to acquire the brand and its wholesale unit, others have expressed interest in retaining a physical retail presence. Of these parties, many expressed an interest in closing some locations and keeping a smaller pool of stores operational.

Can American Apparel survive in its current environment? One thing that could help the company is its focus on basic items, rather than the loudly-branded items that hearken to the first decade of this century and hurt companies like Aeropostale and Quiksilver so badly. Another is that American Apparel does wholesale as well as retail, supplying many smaller clothing manufacturers with blank items to print their designs upon. The fact that it manufactures its clothing in the United States could help the brand as well, if it pushes the notion that consumers are “buying American” when they buy American Apparel.

Work with an Experienced Itasca Bankruptcy Lawyer

Bankruptcy can be a complicated issue and as you can see from American Apparel's example, bankruptcy is not a “cure all” for the issues plaguing a business. If you are considering filing for bankruptcy, speak with one of the experienced bankruptcy lawyers on our team at Newland & Newland, LLP to discuss your options. Contact our firm today to schedule your initial consultation with us. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas from out our office located in the prestigious 180 North LaSalle street building in Chicago.

(image courtesy of Cumulus Clouds)

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