American Apparel (FRA:AA5, Financial) is headed for bankruptcy again.
The company is facing its second bankruptcy in two years according to sources close to the matter. The company’s sales continue to dip causing the company’s future to remain in doubt.
Just over a year ago, the New York Stock Exchange suspended the company’s trading.
Bloomberg sources suggest that the filing could happen as early as the next few weeks. The plan for the company remains uncertain with sources stating a solid holiday season may change the company’s outlook.
The company was taken over by Monarch Alternative Capital in February following bankruptcy. Plans to return the company to its earlier roots didn’t improve sales enough for the company to remain in operation.
American Apparel has been rumored to be seeking prospects for its wholesale unit.
The company operates 200 retail stores which will remain in limbo following a pending sale. Acquiring the company and the retail stores is an attractive option for potential buyers who may choose to leave many stores in operation.
Paula Schneider, the company’s former CEO, stepped down from her position in September.
The company’s CEO and founder, Dov Charney, was fired from his position in 2014. Management issues have caused the company to suffer further. The company’s newest CEO is Chelsea Grayson.
Charney was suspended for misusing the company’s funds prior to being ousted.
The company’s first bankruptcy resulted in the company raising $70 million in new capital and $90 million in a bankruptcy loan to try and restructure the company’s debt. The company’s debt levels were $300 million with the company aiming to reduce the debt to $135 million. The reduction in debt saved the company $20 million a year in interest.
The company's turnaround has not been fast enough, according to sources.
Victoria’s Secret, part of L Brands (LB, Financial), is also in the middle of a restructure. The company has performed well in recent quarters, and the move is an attempt to stay ahead of potential issues. The company announced in August that it would slash 200 jobs.
The stock is a good buy for long-term investors as the brand’s stock is up over 68% in the last five years despite falling 22.47% in the past 12-month period. The issue isn’t Victoria’s Secret – it’s other brands under L Brands that have struggled.
The company’s Bright Night Fantasy Bra was unveiled on Wednesday with the bra costing $3 million. The bra took over 700 hours to make, and it includes 9,000 precious gems. Jasmine Tookes, a 25-year old model, will showcase the bra.
The bra is part of the company’s larger fashion show and has been a focal point of the show for years as viewers are awed by the bra’s beauty.
The Victoria’s Secret fashion show will take place on Dec. 5. The show will include 54 models and will take place in Paris. Numerous models have been added to the company’s lineup in recent weeks, including Bella Hadid, Gigi Hadid, Kendall Jenner and Karlie Gloss.
Dozens of other top models are set to walk the runway, including Adriana Lima, Candice Swanepoel, Stella Maxwell, Taylor Hill and Irina Shayk among others.
Disclosure: No equity postions in any of the stocks listed.
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