American Apparel teetering on the brink of bankruptcy - Macleans.ca
 

American Apparel teetering on the brink of bankruptcy

Company admits its survival is a “going concern”


 

American Apparel, the hip clothing company built by flashy Montreal native Dov Charney, may be on its last legs. With the company’s shares tanking and regulators raising questions about its bookkeeping practices, American Apparel said this week its ability to stay afloat is a “going concern,” suggesting it could soon file for bankruptcy protection. Sales at the L.A.-based retailer’s stores have seen double-digit drops over the past two quarters and American Apparel was carrying $120-million in debt as of June 30. Analysts speculate bringing the company back from the brink of collapse may very well require putting Charney out to pasture. “I would not be at all surprised if it was recapitalized and came back on the other side as a smaller, more focused company,” says Craig Johnson, president of Customer Growth Partners, adding “the changes could best be implemented under new management.”

Financial Post


 
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American Apparel teetering on the brink of bankruptcy

  1. Too bad, I really liked they're plain colored hoodies.

    • Agreed. Best hoodie I've ever bought and I've heard it's also their best seller. But get this, Dov says female employees aren't allowed to wear them on the sales floor anymore.

  2. The prices are far too expensive for what the products are. Plain white t-shirts for 30$. Insane. This is the problem. American Apparel is such a sick company but the prices are too high. It certainly doesn't cost that much for the material and making of the clothes, so there is no need for the prices to be that high. I wanted a plain skirt there, and it was 55$. Made me turn away and walk to Urban Behavior and Aritzia.

    • I never really got why they were trying to retail their shirt blanks on such a large scale. I am a screen printer, and I would think that they would concentrate more on the wholesale market rather than retail. My price is less than $5 a shirt, so I couldn't ever imaging paying their retail prices for blanks. Maybe an online store to sell directly to the public, but 280 retail stores is asking to go broke.

    • Aritzia ain't any cheaper mate!

    • i bought my american apparel plain shirts for like $12 each ..that's a reasobable price considering they are made in america ..i would rather buy stuff made in north america then stuff made in india or pakistan using their dirty water for the dyes

    • It's because the average worker in their factory are paid $12/hr^1., while other American companies pay workers in China 40 cents/hr to make their clothes^2.

      It's not the cost of the cotton itself as much as the cost of labour.

      1. ^ a b New York Post – T-Shirts, As Far As the Eye Can See – Maxine Shen – March 24, 2004
      2. ^ "Good Luck Competing Against Chinese Labor Costs Mfg. Job Growth In China Is Headed Up, Not Down; 109 Million Mfg. Workers In China Dwarfs Number In U.S.". Manufacturing and Technology News. 2006-05-02. Retrieved 2008-04-28.

      • *is paid

  3. Cute clothes, but really, the prices make me wince.

  4. yeah i'll second everyone in saying that if the prices for cheap cotton stretch clothing were where they should be, the company would probably be doing fine. don't they know that most hipsters don't have that much money to spend on non-ironic clothing?

  5. The prices are higher because AA actually makes everything in the United States, thereby paying people the minimum wage. Consumers have become spoiled by Walmart and Target which sell t-shirts, etc. for cheap because they are manufactured in countries where workers are NOT paid well. More jobs for Americans=higher prices.

    • i understand and admire american apparel that they do not outsource their labor. but that does not take a way from the fact that their prices are way too high.

      i have a close friend that buys AA clothing wholesale for a graphic shirt business and pays nowhere near the price of their in store retail prices per shirt. they need to extend the cut to their in store customers- they would be much better off.

      their problem is they 'bit off more than they can chew'
      i live in los angeles california, on my 8 mile commute to work i pass by 4 AA stores in areas where i know rent is insanely high- (melrose, santa monica and robertson avenues in hollywood and beverly hills) if they downsized to just one larger store- they could probably save thousands on rent alone. i mean, they have awesome products- no one would mind traveling a mile or two extra if only their prices were better.

      and as for their employee wages- most of these people are in fact earning just around minimum wage- meaning the likelihood that an AA employee would spend 30$ on 1 plain white v neck is highly unlikely. they are actually creating products that they could never afford and in turn adding to the crumbling economy.

    • i got a two pack of stanfield shirts from the bay, made in canada for $20! the quality also seems high ..if american apparel goes under i will be buying stanfields rather than craaaap made in the third world by kids or semi-slaves

  6. Few garment workers or sales associates (unless they have other means) employed by any retail manufacturer can afford the clothes they produce or peddle. That is not specific to AA.

    I was in an AA store today in VA, and purchased three items. A "T" is not always a "T". I purchased a plain white T for 21 dollars because the fit was superior to lower priced offerings. I'll wear it many, many times in the coming year and will get my money's worth. I also tried on a 5.95 T at H & M today and rejected it. No comparison in quality or cut. I also value the Made in the USA principle. Little of what is made here is garbage, since so little is made here.

    I do agree that overexpansion can kill profits… and decrease demand to some extent.

    Retailing can be a tricky and fickle business!

  7. Made I’m USA by “non-documented” workers; meaning illegal aliens from Mexico.

  8. Whoever wrote this article is completely ignorant. A 'going concern' is accounting talk for the ability of a company to operate WITHOUT the threat of liquidation.

    The context in which it is used in this article makes no sense.

    • Why would you say that? I know the accounting speak, and you are right. And AA is using it exactly as you've written, in that there is a question of the ability of the company to operate without liquidating its assets.

    • I think it's a language problem. The Need-to-Know writer has taken this: "It also raised doubt about its ability to continue as a “going concern", meaning that AA doubts its ability to continue as a profitable business, and paraphrased it as this: "American Apparel said this week its ability to stay afloat is a “going concern,” which, of course, makes no sense.

      But anyway, language issues aside, the point stands that AA is in deep doodoo.

      • Deep doodoo unless, like I said, Dov can always reinvent his company into a
        porn production studio! That material he has reportedly been shooting himself,
        hiring his own staff, girls off the street or actual porn stars is quite enticing!

        Long live Montrealers who go off to Holiwood and make it big despite being weirdos!

  9. Dov can always reinvent his company into a porn production studio!
    That material he is reportedly been shooting personally is quite enticing!

  10. I hope they can ditch Dov and all his creepy/molesty shenanigans, because they have some great basic menswear shirts that I will sorely miss if they go belly up. My favourite juicy green summer shirt that I've worn more than any other for the past 2 years is from AA.

    • Derek, what's wrong with you? Dov Charney is AA! http://www.youtube.com/watch?v=hYqR8UIl8A4

      The real problem is that the company expanded way too fast,
      across many markets and with a multitude of small outlets.

      I call it the Tower of Babel Complex where people think the sky's the
      limit which causes them never to pause to consolidate their position
      and strengthen their base to make sure they outlast their competitors…

      • True about fast expansion etc. But I think the company could carry on with some good young designers without Charney and still be a success. He was good for hitting the right notes design-and-ad wise in the right place/right time a few years ago, but has since become a liability. Plus, his sleazy treatment of his young female employees makes me not want to shop there anymore until he's been ditched.

  11. I hope AA go bust, im sorry to say as im a custom t-shirt printer and people only like them because theyre cool they have no substance,their stuff (in my opinion) is badly made and it costs far far too much even there automated voice when you call is stupidly contrived they got some girl who sounds like shes fresh from exposing her self at spring break.
    dov charney is all mouth and no trousers. there are plenty of companies who ethically manufacter for a good price ( at least 3-4 times less) and who cares if its made in the US it doesnt make it good its also made by mexican migrant workers so why not just build the factory there instead….

  12. you're out of your mind if you think it's okay to justify shopping at this store run by a perverted, chauvinistic, jerk. "their clothes are made in the US" and "they look cool" do not make it okay, at all. you're either oblivious to the truth, lacking any morals, or too weak to stop shopping at this place.

    • Do you honestly think that the morals of any other companies are good? Since when did we start rating clothing on how often the designers go to church?
      It's a personal style choice. Besides, I'd rather wear an expensive, plain T-shirt made in the states by someone making minimum wage than shop at Forever 21 and support sweatshop labour. (not to mention walk out with a Bible verse on my shopping bag).
      Besides, Dov Charney's "morals" don't really effect anyone except those close to him. AA employs hundreds of people and supports sustainable, socially conscious labour.
      Maybe you're the one who needs to be less oblivious.

  13. wellll obviously they are bound to go bankrupt.
    Over pricing their products.
    OTher companies are beginning to replicate their sweaters and selling them for cheaper.
    The same ol' classic plain zippy with the white zipper and draw string is being seen all over for cheaper.
    And can you tell the difference? Probably not.

    • The prices are "overpriced" because their employees are paid fair wages.