Bankrupt American Apparel will close nine poorly performing stores including locations in Georgetown and Tribeca by the end of December, according to a document filed on Wednesday in a U.S. Bankruptcy court in Wilmington, DE, which was obtained by The Wall Street Journal.
These particular stores are likely to be left behind by any potential buyer, according to restructuring adviser Joseph D’Ascoli in a court filing. “Additionally, store managers at several of these stores have resigned, increasing the challenge of continuing to operate them during the holiday season,” D’Ascoli said in the filing.
American Apparel, which has reached a $66 million sales agreement with Canadian T-shirt company Gildan, will auction its remaining 90 U.S. stores on Jan. 9. The retailer earlier this week notified some 3,500 factory workers in the Los Angeles area that they could be laid off if another bidder does not emerge: Gildan is likely to move manufacturing to North Carolina, and some production could migrate overseas, where Gildan already has factories.
Employee anxiety is running high as American Apparel prepares to dole out dozens of pink slips, a clear signal the retailer is running out of time to find a bidder interested in taking on its remaining U.S. stores and 83 global locations. Gildan, the Montreal-based suitor that has already bid for the retailer’s intellectual property and other assets, is not interested in purchasing any of its stores but may consider buying some of American Apparel's Los Angeles-based manufacturing facilities, which would save some jobs.
American Apparel has until Jan. 12 to garner competing bids that may include its stores. No other companies have proposed picking up the retail outlets, and given the current retail environment, it's unlikely any will, 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. Unless a surprise bidder emerges in the coming weeks, Levitin adds that his initial impression is that Gildan's stalking horse bid will be the best way for American Apparel to maximize value.
American Apparel first filed for Chapter 11 bankruptcy protection in Oct. 2015, emerging in February as a private company. Despite consecutive bankruptcies occurring within a little over a year, Levitin says brands shouldn’t become “tainted by bankruptcy,” and while it’s unlikely for American Apparel to live on as a retail operation, the brand itself retains value. “The brand is appealing and worth something to Gildan, and they are looking at some production facilities,” he said.