US teen clothing retailer American Apparel explores sale

US teen clothing retailer American Apparel has hired investment bank Houlihan Lokey Inc to explore a sale, Reuters yesterday reported, citing people familiar with the matter.

The move comes just six months after American Apparel emerged from Chapter 11 bankruptcy.

The Los Angeles-based company had struggled with shrinking sales, as well as litigation tied to its founder and ex CEO Dov Charney. It filed for chapter 11 in the US Bankruptcy Court in Delaware in October 2015.

"As we have regularly communicated to employees, vendors and customers, we continuously evaluate strategic alternatives," American Apparel, which is now owned by its former creditors, said in a statement.

Charney, a Canadian-born artist and industrialist, had in January teamed up with investor group Hagan Capital Group and Silver Creek Capital Partners to table a $300-million bid for the retailer.

The board of American Apparel rejected the offer saying that the ''debtor's plan is not feasible and will lead to poor long-term recoveries for the company's stakeholders and put thousands of manufacturing jobs in Los Angeles at risk.'' (See: Bankrupt American Apparel rejects $300-mn takeover bid from investor group) Charney, who founded American Apparel in 1989 and holds a 52-per cent stake, said in December 2015 that he was exploring plans to revive the bankrupt company.

Although it has around 250 owned stores worldwide, American Apparel has not made a profit since 2009 and losses over the last five years have topped $340 million, forcing it to raise capital to make ends meet.

The company also had to contend with image problems and had been criticized for its racy advertising and sexually-charged culture.

The board officially fired Charney in December 2014, bringing to a close the saga that started with board suspending him in June for misconduct.

In their termination move, the directors had cited infractions such as failure to adhere to the chain's sexual harassment policies and using company funds for family members' travel expenses. Charney's lawyer had dismissed the allegations as ''baseless.''

The New York Times had reported that Charney, who had led American Apparel since 1998, earned a reputation for outlandish behaviour and hyper-sexualised ad campaigns and had been accused by former employees of sexual harassment several times.

Though Charney managed to survive the scandals, matters came to head when an internal investigation found that he had misused company funds.

The investigation also determined that he had allowed an employee to post on the internet nude photographs of a former female employee who had sued him.