Skip to main content

American Apparel Declares Bankruptcy – Relax

The New York Times this morning is reporting that American Apparel has filed for bankruptcy.

It always is a scary word, this “bankruptcy,” but at least two big equipment manufacturers and one big garment company in our industry have gone through it and come out as very strong companies afterward.

There really should different words, but instead we have the chapters of the U.S. Bankruptcy Code to name these very different processes. Chapter 7 is the dreaded one, when they sell off all your stuff to pay the creditors. Chapter 11 is when a business reorganizes and pays back some or all debts according to a plan that the creditors and judge approve. Chapter 12 is reorganizing for a farm, and Chapter 13 reorganizing for an individual. American Apparel has a plan, you can read about it in The Times article, they are filing to go Chapter 11.

Glad to hear that the plan does not include layoffs. It mostly appears to be debt relief and cash infusion. As a buyer I would expect to see better inventory and the only problem might be that they will be stricter with giving credit.

American Apparel is the only fashion brand that my customers really know. It is a company that really is unique as a fashion AND anti-sweatshop AND made-in-America brand.

Things change. They known for nice thin ringspun cotton shirts and tight form fit. However, in the first Quarter they are coming out with a woman’s shirt that is a bit different in that it fits women over age 15. Change has to happen or you go backwards.

They will be back I’m sure.


  1. This would all be well and good if they actually paid back shareholders – the ones who actually own the company.

  2. Dov essentially got screwed by hedge fund managers if I’m not mistaken? Not sure AA will be the same without him. I hope they rebound.

    1. That’s what happens when you run a business that is not making profit. I’m glad that they can reorganize and save jobs – that’s great. But all in all, Dov put them in that position. I own stock in AA and have, the only thing that was saving the business was the product (and wholesale orders) and they were even having trouble scaling that. What has saved them is getting rid of Dov, filing for Chapter 11 and stopping the bleeding. I would have been an advocate for Dov if, like many other founders before him, he knew when to take a step back and give the CEO reigns to a more seasoned leader with some business savvy. He could have still made a positive impact on the company while actually pointing the company on an upward path. I have no sympathy for him. If he wasn’t micromanaging every aspect of AA then he may have seen it coming.

Leave a comment