American Apparel got the go-ahead to shutter nine of its U.S. stores by Dec. 31 after Judge Brendan Shannon of the U.S. Bankruptcy Court in Wilmington, DE approved an agreement with its liquidators on Monday, The Wall Street Journal reports.
Those stores (which are in Washington, D.C.; New York City; Seattle; Atlanta; Dallas; Memphis, TN; Santa Cruz, CA; Evanston, IL; and Burlington, VT) can begin using “going out of business" signs. Any of its remaining 110 U.S. stores not sold in a January auction will close by April 30.
The liquidation sales could garner some $600,000 for American Apparel, which also stands to save some $200,000 per month in rent. Canadian T-shirt maker Gildan, which has offered $66 million to buy the retailer’s name and potentially some of its U.S. manufacturing facilities, has said it won’t take any of its stores.
This is the wind-down of American Apparel — a retailer founded in 1989 by Canadian Dov Charney (who was ousted 25 years later), which dominated the nineties with its cool basics and edgy marketing, but failed to pull itself out of the doldrums after emerging from bankruptcy in February.
The company's clothing was well made but not luxe. As fickle younger consumers began to frequent the ultra-cheap, ultra-trendy fast-fashion retailers, (a habit cemented by the recession), American Apparel was left unable to compete with the lower prices and had little to offer big spenders with interest in couture labels.
Despite its mounting debt over the years and its more recent failed turnaround plans, American Apparel's brand remained robust enough to pique the interest of several brand licensors, though it’s not clear how much interest its January auction will attract outside of Gildan and liquidators.
"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."
The company’s U.K. operations, with executives from consultancy KPMG appointed as administrators of the struggling apparel retailer's 13 British locations, have already begun to wrap thing up, unrelated to the U.S. bankruptcy proceedings. Those stores will close after the holidays, KPMG joint administrator and restructuring partner Jim Tucker said last month, and the company will seek to sell those stores in prime locations.