American Apparel abandons UK stores, resumes talks with bidders

Dive Brief:

American Apparel is winding down its U.K. operations, with executives from accounting giant KPMG appointed as administrators of the struggling apparel retailer's 13 British locations.
American Apparel has stopped shipments to the U.K., but those stores have enough inventory to get through the holidays, The Wall Street Journal reports.
Meanwhile, talks between American Apparel and brand licensing firm Authentic Brands Group have broken down, and hopes for a sale have shifted to brand license company Sequential Brands Group and financial services company B. Riley Financial, among other potential suitors, Reuters reports.

Dive Insight:

American Apparel is reportedly readying itself for a U.S. bankruptcy filing, its second in little over a year, in an effort to become a more attractive target for a sale. The retailer recently missed $2.5 million in distributions that were part of its previous Chapter 11 reorganization plan.

Since emerging from bankruptcy in February as a private company, American Apparel has continued to struggle with sales. A turnaround never gained traction. Former CEO Paula Schneider — who had been tasked with the revamp after the bruising ouster of founder Dov Charney — stepped down in September amid reports the retailer might move some of its operations overseas, and subsequently joined Delta Galil as CEO of its new DG Premium Brands unit.

Now comes word that American Apparel is retreating from the U.K. market. “The American Apparel group has been experiencing strong retail headwinds, which has culminated in the U.S. parent deciding to stop inventory shipments to the U.K. The UK business has experienced similar trading difficulties, resulting in the appointment of administrators," Jim Tucker, KPMG joint administrator and restructuring partner, said in a statement. “The 13 U.K. stores are well stocked and will continue to trade as usual in the lead up to the peak Christmas trading period. Whilst the U.K. business is not part of the U.S. sale, a number of the U.K. stores are in prime high street locations, and we will also aim to sell individual stores following the Christmas trading peak.”

Since emerging from bankruptcy under the watch of bondholders led by Monarch Alternative Capital, American Apparel has brought in strategic advisory firm Berkeley Research Group to oversee its U.S. restructuring efforts, according to a Debtwire report obtained by Retail Dive.

Any potential sale must guarantee that American Apparel keeps its manufacturing operations within the U.S., despite cheaper alternatives abroad, Reuters reports. American Apparel and its suitors did not respond to requests for comment.

During its last bankruptcy proceeding, American Apparel fiercely opposed a sale back to Charney, who proffered a bid that topped the company's own value range. U.S. Bankruptcy Judge Brendan Shannon at the time said that Charney’s argument boiled down to the idea that the retailer couldn’t survive without him, an argument Shannon rejected. In addition, American Apparel's creditors strongly backed the retailer’s own plan, something that carries great weight in Chapter 11 proceedings, compared to an auction.

While it’s unclear whether American Apparel could have been revived under Charney, it’s clearly having extreme difficulty without him. However, Charney has told Retail Dive that he’s now working on establishing a new t-shirt company and that at this point, he’d have to see the asking price and assess other considerations like inventory before considering buying back the retail company he founded in 1989.