Dive Brief:

• American Apparel is actively searching for a buyer and Los Angeles investment bank Houlihan Lokey has been hired to explore a sale, two sources told the Los Angeles Times. Women’s Wear Daily also reported that investor Ron Burkle’s Yucaipa Cos. has probed the embattled retailer's finances. 

• American Apparel CEO Paula Schneider recently stepped down, and her last day comes next month. Incoming CEO Chelsea Grayson, an attorney who has served as American Apparel's general counsel for two years, has little retail experience. Lloyd Greif, CEO of investment banking firm Greif & Co., told the Times that Grayson’s placement shows that the retailer expects to be bought and is passively acknowledging that a buyer would install its own chief executive. He said it also shows American Apparel's board is dissatisfied with the company’s turnaround efforts after emerging from bankruptcy early this year.

• “Nobody expected them to put it out in the marketplace so fast,” Greif said. “That means the company is bleeding. It’s hemorrhaging.” American Apparel dismissed the speculation, however, telling the Los Angeles Times “As we have regularly communicated to employees, vendors and customers, we continuously evaluate strategic partnership opportunities to fuel the growth of the brand.”

Dive Insight:

Fast fashion, changing consumer tastes and priorities, and fatigue around American Apparel’s highly sexualized marketing have taken a toll on the retailer. Yet Schneider and her team never came up with anything remotely daring or even interesting enough to take the place of controversial founder Dov Charney’s vision, which included a dedication to manufacturing in Los Angeles and providing decent pay and treatment of factory workers, many of whom stayed loyal to him throughout the legal and public relations tussles of the last couple of years. 

Those workers, who have faced layoffs in recent months and could see American Apparel's factory operations move out of state, are likely rooting for Charney to take back the company. His investors left the door open to do so months ago.

For his part, Charney seems done. He told Retail Dive that he is now working on establishing a new t-shirt company (the same way American Apparel started) and that he’d have to see the asking price and assess other considerations like inventory before considering buying back American Apparel. Still, Greif told the Los Angeles Times that Charney could yet emerge as a buyer.

American Apparel may need to file for Chapter 11 again to stanch the bleeding. In addition to Charney, a brand group like Iconix Brand Group (which owns Sharper Image, Ed Hardy and Candie’s), Sequential Brands Group (Martha Stewart, Jessica Simpson and Ellen Tracy) or Authentic Brands Group (which recently joined in the $243.3 million bid to save bankrupt teen apparel retailer Aeropostale) could incorporate American Apparel. A private equity firm (at least one willing to take on a volatile apparel retailer) also might be interested.