Roger
2015-10-05 22:45:32 UTC
American Apparel filed for Chapter 11 bankruptcy on Monday after
listing $199.3 million in assets and $397.6 million in debt,
giving the company a negative book value.
The retailer known for its made-in-the-USA clothing has about
8,500 employees and 230 stores throughout the world. It is not
yet clear whether the company plans to lay off any employees or
close any stores.
The deal struck with creditors through a debt-for-equity
conversion would allow the company to maintain current
operations and bondholders to gain shares in the company in
place of their current debt.
The companys shares closed at 11.2 cents Friday after
announcing in August it might not have enough capital to sustain
operations as normal for 12 months. The Los Angeles-based
company has not made a profit since 2009.
Founder and former CEO Dov Charney was fired in Dec. 2014,
facing a number of lawsuits accusing him of sexual harassment.
Mr. Charney has since sued the company, saying that the
accusations are unfounded.
And along with internal drama, American Apparel has faced
growing competition from fast-fashion retailers such as H&M,
Forever 21, and Zara who can offer young consumers cheap
clothing manufactured overseas. Gap has also suffered from fast-
fashion competition, announcing in June that the chain will be
closing 175 stores, The Christian Science Monitor reported.
But American Apparels new CEO Paula Schneider has denied rumors
that the company would move production outside of the US to cut
down on costs. We will continue to manufacture in America, she
said. Thats what the brand is. Thats what its about.
The company has also been dogged for years by concerns over what
many consider to be overly sexualized advertising.
In an advertising study published in the American Psychological
Association journal in July, a group of psychologists disagree
with the assumption that sex sells. In general, we found
violent and sexual programs, and ads with violent or sexual
content decreased advertising effectiveness, they wrote. Sex
and violence do not sell, in fact they may even backfire by
impairing memory, attitudes and buying intentions for advertised
products.
Clothing retailer Abercrombie & Fitch has experienced some of
the same ills. Once a coveted brand of the 1990s and early
2000s, the stock is down 30 percent this year and is trading at
its lowest levels since early 2009. Before retiring in January,
CEO Mike Jeffries faced criticism after making comments about
only wanting cool, good-looking people to wear his companys
clothes.
Reports last year from Nielson and other consulting groups
confirm that millennials are more likely to consider
sustainability and social responsibility in their buying
decisions than previous generations, the Guardian reported. In
other words, even if retailers like American Apparel and A&F
compete on pricing and style, that doesnt mean I want to shop
at a place that treats other people badly, one millennial
confirmed.
And for American Apparel, allegations against Charney likely
amplified a shaky advertising plan. When the allegations that
he was sexually inappropriate arose it turned something that was
fun and exciting into something creepy, Nicky Baird, an analyst
at Retail Systems Research, told the Guardian.
Viewers in the UK have been creeped out for awhile now.
Britain's Advertising Standards Authority has been banning
certain American Apparel adds since 2009, arguing that the
retailer's ads "inappropriately sexualized young women."
American Apparel and A&F have both confirmed they will end
overly sexy ads in an effort to improve sales.
By improving our financial footing, we will be able to refocus
our business efforts and create captivating new marketing
campaigns that will help drive our business forward, Ms.
Schneider said in a statement Monday.
And while there is no confirmation about what these new
marketing campaigns will be, they will likely be a reserved
take on the companys risqué past branding.
http://www.csmonitor.com/Business/2015/1005/American-Apparel-
bankruptcy-Were-risque-ads-a-turnoff-for-consumers
listing $199.3 million in assets and $397.6 million in debt,
giving the company a negative book value.
The retailer known for its made-in-the-USA clothing has about
8,500 employees and 230 stores throughout the world. It is not
yet clear whether the company plans to lay off any employees or
close any stores.
The deal struck with creditors through a debt-for-equity
conversion would allow the company to maintain current
operations and bondholders to gain shares in the company in
place of their current debt.
The companys shares closed at 11.2 cents Friday after
announcing in August it might not have enough capital to sustain
operations as normal for 12 months. The Los Angeles-based
company has not made a profit since 2009.
Founder and former CEO Dov Charney was fired in Dec. 2014,
facing a number of lawsuits accusing him of sexual harassment.
Mr. Charney has since sued the company, saying that the
accusations are unfounded.
And along with internal drama, American Apparel has faced
growing competition from fast-fashion retailers such as H&M,
Forever 21, and Zara who can offer young consumers cheap
clothing manufactured overseas. Gap has also suffered from fast-
fashion competition, announcing in June that the chain will be
closing 175 stores, The Christian Science Monitor reported.
But American Apparels new CEO Paula Schneider has denied rumors
that the company would move production outside of the US to cut
down on costs. We will continue to manufacture in America, she
said. Thats what the brand is. Thats what its about.
The company has also been dogged for years by concerns over what
many consider to be overly sexualized advertising.
In an advertising study published in the American Psychological
Association journal in July, a group of psychologists disagree
with the assumption that sex sells. In general, we found
violent and sexual programs, and ads with violent or sexual
content decreased advertising effectiveness, they wrote. Sex
and violence do not sell, in fact they may even backfire by
impairing memory, attitudes and buying intentions for advertised
products.
Clothing retailer Abercrombie & Fitch has experienced some of
the same ills. Once a coveted brand of the 1990s and early
2000s, the stock is down 30 percent this year and is trading at
its lowest levels since early 2009. Before retiring in January,
CEO Mike Jeffries faced criticism after making comments about
only wanting cool, good-looking people to wear his companys
clothes.
Reports last year from Nielson and other consulting groups
confirm that millennials are more likely to consider
sustainability and social responsibility in their buying
decisions than previous generations, the Guardian reported. In
other words, even if retailers like American Apparel and A&F
compete on pricing and style, that doesnt mean I want to shop
at a place that treats other people badly, one millennial
confirmed.
And for American Apparel, allegations against Charney likely
amplified a shaky advertising plan. When the allegations that
he was sexually inappropriate arose it turned something that was
fun and exciting into something creepy, Nicky Baird, an analyst
at Retail Systems Research, told the Guardian.
Viewers in the UK have been creeped out for awhile now.
Britain's Advertising Standards Authority has been banning
certain American Apparel adds since 2009, arguing that the
retailer's ads "inappropriately sexualized young women."
American Apparel and A&F have both confirmed they will end
overly sexy ads in an effort to improve sales.
By improving our financial footing, we will be able to refocus
our business efforts and create captivating new marketing
campaigns that will help drive our business forward, Ms.
Schneider said in a statement Monday.
And while there is no confirmation about what these new
marketing campaigns will be, they will likely be a reserved
take on the companys risqué past branding.
http://www.csmonitor.com/Business/2015/1005/American-Apparel-
bankruptcy-Were-risque-ads-a-turnoff-for-consumers