Ethical clothing company American Apparel files for bankruptcy

Trouble for fashion chain follows sexual harassment scandals involving former CEO

Clothes shop American Apparel has filed for bankruptcy protection in the US and is to undergo a complete restructuring process.

The fashion chain with the “made in America” tag is in debt to the tune of $300m, though in a statement, the firm said that filing for bankruptcy has allowed it to make an agreement with its creditors to reduce the debt to $135m, and cut its annual interest bill to $20m.

While the company was built by founder Dov Charney on ethical production principles, the man himself was ousted amid a storm of misconduct claims.

Charney was fired last year after sexual harassment claims and reports of sexual acts performed in front of journalists began to emerge. He is is currently embroiled in a number of lawsuits.

Under Charney the firm’s advertising practices also caused uproar, with some particularly sexualised ads featuring teenagers being banned.

Charney was replaced by Paula Schneider, who has sought to reduce overheads by closing some stores, cutting costs and overhauling clothing lines.

Speaking to the FT earlier this year, she said the ethical business “deserved to live”, as it would be near impossible to replicate.

She said: “This is a brand that people care about. This is the Cinderella story. This one deserves to live. If it doesn’t live no other one will because the barriers to entry are simply too high and no one will ever do this again.”

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Readers' comments (1)

  • Rebecca Hobson

    No no no! American Apparel is the ONLY ethical high street retailer. Virtually every other brand on the high street is engaged in sweatshop manufacturing in some capacity. Would be devastating to lose AA.

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