Famous Label, American Apparel, goes bankrupt

U.S. based clothing label, American apparel, has filed for chapter 11 bankruptcy protection. The label is famous for its explicit campaigns and series of sexual harassment lawsuits leveled against its former CEO who was fired by the board last year Spring.

Disregarding their racy fashion campaigns that appalled the public, the major reason for the bankruptcy decision was due to plunging sales, with debt rising up to $300m.

The board reached a reasonable agreement with investors by reducing the debt to $135m. American Apparel was not fashion forward enough and the creative direction was a bit too laid back for the teenagers who are their target market. The label, favoured by celebrities like Kim Kardashian, was selling a basic t-shirt for $30, same price point as what you’ll find in Zara or H&M with a much better design.

American Apparel started out in the dorm room of founder, Dov Charney back in 1989 and expanded to 260 shop in 16 countries.

The company won the hearts of many by manufacturing only in America, boycotting Asian sweat shops and also paying immigrant employees 200% in minimum wage. The company recorded a two and half year loss, tanking sales to 17%.

The business of fashion is cutthroat and this is one of the many reasons why I request that budding designers understand their target market before dabbling into the field.