Business

American Apparel files for second bankruptcy protection

A man walks by an American Apparel store Image copyright Getty Images

US retailer American Apparel (AA) has filed for its second bankruptcy protection in just over a year.

The youth-focused clothes firm, hit by years of losses, will continue trading while it negotiates a potential sale of assets to Canada's Gildan Activewear.

Gildan said it had offered $66m (£53m) for the rights to the AA brand and stock, but did not want the stores.

AA, known for racy advertising and legal battles with founder Dov Charney, emerged from bankruptcy in February.

The company said last week that it was winding down its operations in the UK.

American Apparel has been looking for a buyer and has had talks with brand licensing firms Sequential Brands and Authentic Brands, as well as a financial company, B. Riley Financial.

It is the latest in a growing list of clothing brands that have gone under recently, including Aeropostale, Quiksilver, Wet Seal and Pacific Sunwear. Chains are struggling as consumers shun stores in favour of online shopping.

American Apparel filed its first bankruptcy in October 2015, following a steep drop in sales and a drawn-out legal battle with Mr Charney, who was ousted in 2014.

The retailer emerged from bankruptcy this year under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital.

But it continued to face falling sales, exacerbated by its costly manufacturing plant in Los Angeles. Under mounting pressure, American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale.

The company has insisted that any sale must involve keeping its manufacturing plant in the US.

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