Brief

UPDATE: Next Level Apparel reportedly bids on bankrupt American Apparel

Dive Brief:

Dive Insight:

After several months of entertaining Gildan’s bid, it seems American Apparel may now have several last-minute options to chose from — including e-commerce giant Amazon. Such an acquisition would be a strategic move in building out Amazon’s private-label fashion assortment: Over the last year, Amazon has made significant investments in the apparel space and is poised to dethrone Macy’s as the largest U.S. clothing retailer this year. On the other hand, Forever 21’s low-cost teen-apparel model aligns more closely with the American Apparel brand, which once dominated youth fashion with its retro fashion sensibilities and sexualized marketing efforts.

Despite American Apparel's years of mounting debt and its more recent failed turnaround plans, that brand has remained robust and attractive to competitors. "The brand name itself is completely cool — I don’t think anyone has an issue with it and the price points were always attractive," Mark Cohen, Columbia University business school retail studies professor, told Retail Dive."[But] there’s no rational business plan there, and there hasn’t been for many years. For the brand to have a future, someone has to craft a business plan that makes sense. Gildan is big enough, they're deep pocketed enough to do that, but it's not clear what their endgame strategy is. Smart people with enough cash and control can do successful things."

American Apparel first filed for Chapter 11 bankruptcy protection in Oct. 2015, emerging in February as a private company. It refiled for bankruptcy in October 2016 after the abrupt exit of CEO Paula Schneider (who recently joined Delta Galil as the CEO of DG Premium Brands). The retailer has slimmed down operations significantly within the last year. Since February, the company has laid off hundreds of employees, shuttered dozens of stores and pulled the plug on its UK stores.

Regardless of who succeeds in the fight over the sometimes-scandalous retailer, it’s likely that American Apparel will cease to exist as its current retail chain operation, Joel Levitin, partner in Cahill Gordon & Reindel LLP’s Bankruptcy & Restructuring and Bankruptcy Litigation practices, told Retail Dive.

“It seems to me right now there is not a long waiting line in terms of entities and new businesses looking for retail space,” Levitin said, which means that although several stores with prime real estate may be sold, the majority will likely revert back to their landlords. It's unclear whether Amazon, Forever 21 or next Level Apparel are interested in picking up any of American Apparel's physical locations. 

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Filed Under: Corporate News