
American Apparel Files for Bankruptcy - fisherjeff
http://www.nytimes.com/2015/10/06/business/american-apparel-files-for-bankruptcy.html?_r=0
======
chollida1
Issues with the founder aside, This is the default for most fashion brands
that make their mark by being "edgy".

Your cool for a while until its the brand that your dorky older sister used
wear and then you just become another brand. A similar analogy can be made for
Facebook, it was cool in 2008, in 2014 when your mom and grandma want to
friend you, not so much. Atleast tech companies like Facebook stand a chance
of keeping their users as they age.

Not many 30 year olds have both the body and the mentality to wear the
American Apparel clothes that they bought when they were in university.

Restaurants are very similar, which is why they tend to start to group
together under uber companies that run each brand as stand alone entities.
Fashion also tends to follow this playbook. This atleast lets companies
diversify their risk among multiple brands.

Its been said that tech companies need to reinvent themselves every 15 years
to stay relevant, in fashion, its more like every 4 years and that's
depressingly quick.

~~~
newobj
Don't know how their monochromatic, print-less clothes can be seen as edgy.
The styling of the models, provocative sure, but the clothes were about as
plain as can be.

~~~
onedev
It's only partly about the clothes though. The brand and how they portray
themselves is definitely "edgy" regardless of the reality reflected in the
styling of their clothes. And that portrayal affects how people feel about the
clothes.

------
navait
Being an extremely small person, American Apparel appealed to me for making
clothes that fit me well. Yet, AA always sold clothes that to me appeared
garish( I'm never was into the punk hipster look of their models) and flimsy
quality of the clothes I did like made it difficult for me to buy more from
them.

While the management problems, debt issues and slowing demand were problems,
it seems they never really tried to bring in different consumers. I hope they
consider different markets in their reorganization.

~~~
smcl
That's a strange coincidence, I'm tall (6 feet 2) and their clothes hit the
sweet spot for me fit-wise, I know of a handful of others the same. Personally
I hope they stay open purely so I can keep ordering their hoodies and long
sleeve tshirts

------
nostromo
> Still, the bankruptcy would wipe out American Apparel’s current
> shareholders, including Mr. Charney, whose stake in the retailer that he
> founded in 1989 was worth about $8.2 million as of Friday.

That's a shockingly low number for a founder of such a huge business.

~~~
rhino369
Unless they come out of bankruptcy without having to screw creditors, his
stake is worth $0. Equity is the first to get wiped out in bankruptcy.

~~~
shostack
How does that work exactly? Does the value of the equity simply go away, or is
ownership of the company literally handed over to the creditors?

Just listened to a Planet Money episode on the benefits of bankruptcy, and it
seems like while you will have every single document and decision
reviewed/approved by creditors and the judge if you try to make a deal and pay
it off, you'd still retain ownership.

Not familiar enough with the details though to know how that works in various
scenarios.

~~~
ChuckMcM
Well in a recapitalization the board votes to issue all new shares in the
company, sometimes previous shares are "converted" and sometimes simply new
options/grants are handed out. Under the auspices of a bankruptcy proceeding
you're basically out of business so it's a matter of everyone agreeing on what
the right course of action is to move forward. If you are ever bored and want
to see how convoluted these things can get, look at some of the GM filings
when they were bailed out by the government :-)

~~~
shostack
Interesting--thanks for clarifying. And are board seats typically handed over
to the creditors during bankruptcy? Ie. do the creditors gain control of the
board directly or via the ability to override their decisions?

I can only imagine the GM filings...will have to take a look at that sometime.

~~~
ChuckMcM
Read the docket (posted up thread), but generally shareholders are debtors-in-
possesion meaning they are "owed" a fraction of the company if they sold their
shares. Everyone who has a share of American Apparel is listed on that docket
as a creditor.

As for board seats, I can't say. I've watched a couple of large companies
restructure fairly closely but don't recall board seats being offered as part
of that. Certainly at the point of being in Chapter 11 bankruptcy you're no
longer the company you once were, one option is always to liquidate and move
to Chapter 7 to disperse the assets. We had a customer company do that (one of
the baby telephone companies) in the dot com bust when I was at Tut/FreeGate.
As I recall from that transaction we got a check for around $3,000 for what
had been something like $1.2M worth of networking gear they had deployed and
not yet paid for.

~~~
shostack
Fascinating. Thanks for sharing your experience on that.

Am I right in assuming that creditors are able to write off any such losses
(such as your networking gear example)?

~~~
ChuckMcM
Absolutely, (writing off the lost sales).

------
pfooti
The real important question is: are there other sources for made-in-america
clothing? Alternatively: sweatshop-free, living-wage clothing not necessarily
made in America? I am not AA's target demographic, but I tend to buy their
t-shirts because I would like to avoid supporting the pretty terrible working
conditions most fashion companies create in their factories. For example, I
buy really nerdy-looking blue jeans from Duluth Trading Company [0] because
they're american-made.

[0]: [http://www.duluthtrading.com/store/product/mens-
ballroom-5-p...](http://www.duluthtrading.com/store/product/mens-
ballroom-5-pocket-jeans-made-in-usa-84011.aspx)

------
ChrisArchitect
other than the whole hipster/fashion story of this (which is hardly relevant
these days/that's old news) -- there is another side of note: AA is a
significant wholesaler of plain tees to printers/startups etc.... I know there
are a handful of other brands on the market, AA maybe was more significant in
previous years, but that's still gotta be a thing

------
mikikian
For those interested, here's the voluntary petition (
[https://drive.google.com/file/d/0B5k5SQee7k5pcW0zUmlYdmFKc1k...](https://drive.google.com/file/d/0B5k5SQee7k5pcW0zUmlYdmFKc1k/view?usp=sharing)
)

Chapter 11 Voluntary Petition . Fee Amount $1717. Filed by American Apparel,
Inc.. (Attachments: # 1Board Resolutions # 2Top Creditors with Certification #
3Creditor Matrix # 4Verification of Creditor Matrix # 5Corporate Ownership
Statement) (Jones, Laura Davis) (Entered: 10/05/2015)

and the docket (
[https://www.inforuptcy.com/filings/debke_160493-1-15-bk-1205...](https://www.inforuptcy.com/filings/debke_160493-1-15-bk-12055-american-
apparel-inc-bankruptcy) )

------
Animats
Brandy Melville is taking over their market segment, selling solid-color
clothes for thin teens. Abercrombie and their surf-poser Hollister brand are
more about the logo.

The Iconix Brand Group has made a business of buying up hip brands in decline
and turning them into JC Penny/Walmart/Kmart labels. They own about 25 once-
cool brands, including Danskin, Ocean Pacific, Joe Boxer, and Peanuts. Maybe
they'll pick up American Apparel.

[1]
[http://www.brandymelvilleusa.com/clothing/tops.html](http://www.brandymelvilleusa.com/clothing/tops.html)

~~~
ececconi
Abercrombie and Hollister are moving away from logo designs now that their CEO
Mike Jefferies was removed from office. Source: a college roommate of mine
works at the corporate office.

~~~
Animats
Abercrombie seems to have done that.[1] But without the logo, what have they
got? Their jackets look like everybody else's jackets.

[1] [http://www.abercrombie.com/shop/us/womens-jackets-and-
coats](http://www.abercrombie.com/shop/us/womens-jackets-and-coats)

------
perlpimp
I haven't seen any specific indicators, but isn't running up debts and then
selling company for debts is the definition of hostile takeover? article seems
to be running this thread through entire article without calling it.

------
bruceb
Edgy or not, part of the problem is the macro environment. There is simply a
ton of apparel option for consumers now.

------
samstave
American apparels issue was the price. They used edgy marketing to promote
bland products with inflated prices...

We talk about needing a basic income, but I propose that we need the modern
equiv of "40 acres and a mule" == a basic wardrobe and a basic pantry that
anyone should be able to sign up for... It gives some standard clothing and a
set base of foods to a family and is subsidized across the board in
specifically corporate tax (you shouldn't tax the people for this, you should
tax industry only)...

But I'd love to hear any argument for or against this concept

EDIT: obviously the down votes are "arguments against" without the ability to
articulate your opinion...

~~~
CyberDildonics
No the downvotes are because a hipster clothes company filing for bankruptcy
has nothing to do with basic income drivel.

~~~
dang
Please don't post rude comments. They only make things worse.

------
CyberDildonics
Did filing for bankruptcy become suddenly kitschy and ironically hip?

------
chris_wot
They've been doing sexually exploitative advertising for ages. I for one won't
be shedding any tears.

~~~
kaffeemitsahne
What do you mean, prostitution or sex slavery or what?

~~~
PhasmaFelis
Don't pretend that bad things aren't bad because worse things exist.

Edit: Downvoters, if you've got a different interpretation, I'd like to hear
it. By pretending not to know what chris_wot means by "sexually exploitative
advertising", kaffeemitsahne is clearly implying that it's not real because no
one is literally being forced to have sex for money or survival.

~~~
drdaeman
I wouldn't say it's "clear". Sometimes others have really different views and
awareness about various things. Seriously, that stuff happens and (in my own
perception) when talking with strangers on the Internet it happens way too
frequently.

You've implied something kaffeemitsahne had never said.

