Will bankruptcy cost American Apparel its cool?

Normally making news over its raunchy advertising or its beleaguered founder, American Apparel's problems are now decidedly less risque.

The controversial fashion line filed for bankruptcy with the US courts on Monday, struggling to keep its cool persona while juggling lawsuits and mounting debt.

Until now, much of the company's woes have centred on founder Dov Charney.

Mr Charney founded the company while he was a student at Tufts University in 1989. The sexually provocative advertising campaigns, skintight clothing, and retro designs helped make the company popular among young people.

Business choices like manufacturing in the US have set the company further apart from other retail brands.

In December 2014 Mr Charney was fired from the helm amid mounting sexual harassment lawsuits and slumping share prices. He has filed a wrongful termination suit against the company.

In the end though it wasn't the sexually explicit emails its founder sent to employees or any failure by the new CEO Paula Schneider, but more basic issues faced by retailers - getting too big too fast and taking on too much debt.

American Apparel has built up its reputation as a brand by defying many social norms.

"When you see a company doing what no else does, you think that is notable. But on the other hand you wonder whether if there was a reason no else was doing it," said Kevin Starke a research analyst at CRT Capital Group.

Its models are typically shown half-dressed and in provocative positions. Many of the models are not professionals but are presented along with their bios in the ads. The company has featured orthodox Jews, a 62-year-old and models of every race.


This cultural diversity that the Los Angeles-based company has championed helped the brand to appeal outside the US, while still maintaining an American feel.

The company has faced its share of controversy in the UK as well. Several ads were banned by the Advertising Standards Authority (ASA) after complaints in 2009 and 2012. Another round of ads, which featured a model wearing a thong bathing suit, was banned in March.

America Apparel has 260 stores across 19 countries including 18 stores in the UK. Many of the new locations have been opened in recent years capitalising on the brand's growing popularity.

The company's bankruptcy proposal includes plans to end a number of multi-year leases on store front property. Without filing for bankruptcy, it would be difficult for the company to get out of these agreements.

It is unclear if the UK stores will be affected by this scheme.

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