American Apparel files for bankruptcy again and is set to sell brand to Canadian company Gildan Activewear

Rebecca Smith
The end of an era? Teen retailers have faced a struggle in the US
The end of an era? Teen retailers have faced a struggle in the US (Source: Getty)

Bad news for fans of lamé leotards: now American Apparel has filed for bankruptcy less than a year after ending its first period under court protection.

It's also agreed to sell the brand to Canadian clothing manufacturer Gildan Activewear for around $66m.

In a statement Gildan announced it had entered into an asset purchase agreement to acquire the worldwide intellectual property rights related to the American Apparel brand. It added that "Gildan will not be purchasing any retail store assets".

The process is subject to approval by the American Apparel bankruptcy process and customary conditions. It's expected to be finalised in the first quarter of next year, though the court may require American Apparel to hold an auction for the brand.

Then it would be conditional on Gildan winning the auction; if not, it will receive a break-up fee.

Read more: American Apparel's UK business has gone into administration

Last week, it was announced that the firm's UK business had gone into administration with KPMG's Jim Tucker and Richard Beard appointed joint administrators of American Apparel (UK) Ltd and American Apparel (Carnaby) Ltd.

KPMG said: "The UK and certain European operations are not part of the sale [in the US] and are therefore likely to be wound down."

Read more: Er, ok: American Apparel bans relationships at work

The retailer's founder, Dov Charney, was fired in 2014 over allegations of misconduct and the company later filed for bankruptcy in October 2015. It shed $200m in debt in February and former bondholders, led by Monarch Alternative Capital took over.

But the plan to go back to the company's roots of delivering basics well, didn't do enough to capture customers' interest in the competitive market. And the company continued to face declining sales. The retailer then hired investment bank Houlihan Lokey earlier this year to explore a sale, insisting that any deal keep its manufacturing plant in the US.

Many US teen retailers have struggled - and at least eight, including Pacific Sunwear, Quiksilver and Wet Seal, have filed for bankruptcy over the past two years, as young consumers visit shopping centres less frequently amid the rise of online.

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