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American Apparel Files for Chapter 11 Bankruptcy Protection

American Apparel Files for Chapter 11 Bankruptcy Protection

(Bloomberg)—American Apparel Inc. filed for bankruptcy, less than a year after ending its first stint under court protection.

Gildan Activewear Inc. agreed to buy its intellectual property rights for about $66 million following the filing, the Canadian company said in a statement . Gildan said American Apparel made its filing Monday.

The U.S. clothing retailer ran into trouble just months after shedding $200 million in debt and emerging from Chapter 11 in February. Chief Executive Officer Paula Schneider, who took charge after controversial founder Dov Charney was forced out, resigned in September.

Reports of a possible sale and a return to bankruptcy surfaced in October.

American Apparel emerged from its earlier bankruptcy after former bondholders -- led by Monarch Alternative Capital -- took over. But a plan to return to the company’s roots and focus on basic items like T-shirts and skirts wasn’t enough to improve results.

As part of its previous bankruptcy, the company closed at least 13 unprofitable locations. The goal was to operate 212 stores, which in 2014 had produced $331 million in sales, or 54 percent of the company’s total.

As malls lose foot traffic and more Americans shop online, many U.S. retailers have struggled of late, with clothing companies hit particularly hard. Aeropostale Inc., Quiksilver Inc. and Pacific Sunwear of California Inc. filed bankruptcy in the last two years.

Charney was fired in 2014 over allegations of misconduct. He fought unsuccessfully to regain control of the business he started as a college student. American Apparel’s results only got worse under Schneider, and it filed for bankruptcy in October 2015.

--With assistance from Lauren Coleman-Lochner and Matt Townsend. To contact the reporter on this story: Steven Church in Wilmington, Delaware at [email protected] To contact the editors responsible for this story: Andrew Dunn at [email protected] Thomas Mulier, Nick Turner

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