With American Apparel facing bankruptcy, where will the hipster go?

November 3, 2010

As we all know, American Apparel is no stranger towards controversy. After battling his way through numerous sexual harassment charges over the years, CEO Dov Charney may have finally reached the end of his handle-bared mustache with a newer problem: American Apparel is millions of dollars in debt ($120.3 million by the end of August, to be exact.)

An actual ad by American Apparel featuring Dov Charney

The start of the company’s financial woes began in early 2010, with an 18-month investigation into their production staff- which found that the majority of their employees were illegal immigrants. KABC reported that “The Los Angeles garment industry employs approximately 120,000 workers. About 67 percent are immigrants, many of which are here illegally and work for minimum wage.” After the immigration raid, American Apparel lost around 2,500 of their undocumented employees. This result has apparently disrupted AA’s production so much that they started losing money fast.

In addition, DailyFinace reported that the company is stuck in-between allegations “That American Apparel lied to investors about its hiring practices (citing the immigration action) and about its accounting problems, and through the accounting problems, about the company’s financial health.”

However, AA has had a chance to have its audit withdrawn if financial clarity was reported for the second-quarter (which ended June 30th) by November 15th. After threats of the company being delisted by the American Stock Exchange, American Apparel FINALLY turned in their second-quarter results today.  And of course, the results were not good. NYMag reported “Losses totaled $14.7 million, while sales fell 2.4 percent. Last year in the same period, American Apparel reported an income of $4.5 million. For the first six months of the year, losses totaled $57.5 million as opposed to $6.1 million last year. Sales for the last six months, however, are up 1.7 percent.”

So not only are operation costs killing American Apparel, they do not have any money to pay back the $94 million dollar loan they took out last year from Lion Capital (which they agreed to pay back by Jan. 31, 2011).

As the debt keeps stack up, AA seems like it cannot pull itself out from under. The company released a press statement stating, “Losses were likely to continue through at least the third quarter…These factors, among others, raise substantial doubt that the company will be able to continue as a going concern.”

Erin Gibson, for the Huffington Post provided Charney with two humors solutions to his problems:

Option A:
Stop letting your dick make business decisions
You made a lot of tee shirts hot hipsters love, and by doing so, you’ve hit the pussy jackpot. But think about this: The money it takes to buy these girls blow and put them up in a Silverlake loft will wind up costing your consumers a lot of time…. time spent in the future trying to feel okay in shirts with cute buttons and lace, decorated with a fucking swallow on a birch tree that’s too short and was too expensive to fit so badly.

Option B:
Keep letting your dick make dick decisions and hire someone to run your business.
This option allows you to park your sailboat in any consenting dock and when you want to keep her around someone who has your money can tell you “NO”: Cause apparently you doing whatever you want makes you a bad business man. Let me put it in terms you’ll understand -when your business goes away, so does the pussy. So fix this! I wanna wear my 50/25/25 tees in a nursing home, you asshole.”

Though many do not actually like American Apparel as an image, many do like the way their image looks in the clothes they produce. But unfortunately, it looks like both v-necks and jaded employees will now both be solely found at Urban Outfitters.

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