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American Apparel paints rosy picture after bankruptcy

(Credit: MoneyTimes) American Apparel said it would make a turn around in 2018 and post $23.7million net profit by 2020.American Apparel
October 19
12:06 AM 2015

American Apparel company forecasts robust demand after the bankruptcy turnaround. The US-based fashion chain is predicting more profitable years to come. American Apparel is known for its controversial sexual advertisements.

In a filing to the US Bankruptcy court in Wilmington, Delaware, American Apparel said it would make a turnaround and will record profits in 2018. American Apparel forecasts $23.7million net profit by 2020. In a separate communication, American Apparel has also assured its creditors and suppliers about the future business potential with the company.

If American Apparel is able to make profits in 2018 as it's been anticipating then, it'll be its first year of profitability since 2009. The fashion chain registered its peak level profits in 2007. American Apparel assured its suppliers and creditors that they're main pillars of the company and would play a key role in the future business with it. 

Scott Greenberg, company's bankruptcy attorney, told creditors of American Apparel that the company was in Chapter 11 to cut down interest costs, not to end contracts with suppliers and landlords. According to the filing, unsecured creditors collectively owe $145mn and will get $1mn to be distributed among them.

American Apparel is planning to bring some sort of stabilization in the financial position by getting rid of $200mn in bonds by granting the bondholders some part in the ownership of the company. A group of hedge funds have bonds worth $200mn. 

American Apparel accused of its former chief executive Dov Charney of orchestrating protests at the headquarters and he undermined the ability to hire staff and top executives. Dov Charney was fired over charges of overly sexual advertisements. 

American Apparel was trying to change spending habits of teenage shoppers. Moreover, the fashion chain has been facing turbulent situations over a litigation pertaining to Dov Charney's style of functioning. 

For the second quarter ending June 2015, American Apparel's net sales dropped 17.2 percent to $134.4mn from $162.4mn in the previous corresponding period. The company suffered 14 percent drop in net sales in the same quarter in 2014 also. Lack of new models for the spring and summer seasons resulted in poor sales performance. The gross profits fell 25.3 percent to $61.5mn in the second quarter from $82.4mn in the same period of 2014.

Paula Schneider has been appointed as new chief executive at American Apparel. Schneider is planning to get social issues to top the agenda and promoting brands made in America.

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