Dive Brief:

• Struggling American Apparel is seeking a sale, sources told Reuters. 

• American Apparel has hired investment bank Houlihan Lokey Inc. to explore sale options, insiders said. Earlier this year the company prevailed in a bitter fight against founder Dov Charney, who sought to buy out American Apparel for $300 million during its bankruptcy process.

• Charney told Retail Dive that he is now working on establishing a new apparel retail company, and that he’d have to see the asking price and assess other considerations like inventory before considering buying back American Apparel.

Dive Insight:

Dov Charney was ousted in 2014 over what American Apparel said were violations of company policy, which he has always maintained were baseless. When U.S. Bankruptcy Judge Brendan Shannon rejected Charney’s January attempt to take over the apparel retailer he founded, he said that Charney’s argument boiled down to the idea that American Apparel couldn’t survive without him, an argument Shannon didn’t find sufficient to approve Charney’s bid. 

It may not have been enough to justify a sale then, but it looks like that idea holds water: American Apparel simply may not be able to survive without its controversial but visionary founder. Charney’s bid had topped the value range that had been put forth by American Apparel's own bank, but the retailer was adamant against his return and its creditors had backed its plan.

Fast fashion, changing tastes and priorities, and some fatigue around American Apparel’s highly sexualized marketing have taken a toll on the retailer. Yet CEO Paula Schneider and her team haven't come up with anything remotely daring or even piquant enough to take the place of Charney’s vision, which included a dedication to basing 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 over the company after all. His investors left the door open to do so months ago.

“We are backing Dov on a new venture,” Chad Hagan of Hagan Capital Group told Bloomberg in January. “We will keep an eye out on American Apparel and see what happens with the brand. Ideally, if we can pick it up down the road, we will.”