American Apparel hopes to begin trimming the fat around its U.S. retail base in the event a bidder on its stores does not materialize in its upcoming bankruptcy auction.
Attorneys for the Los Angeles T-shirt firm asked a judge Wednesday to approve an order allowing the company to shutter nine underperforming stores ahead of its bankruptcy auction scheduled for next month. American Apparel had aimed to keep its doors open at the time of its November bankruptcy filing in hopes of shopping the full chain to a prospective buyer.
“While the debtors are optimistic that a retail purchaser will emerge, they recognize it is unlikely that a retail buyer will purchase all of their 107 domestic retail locations or all of their retail inventory,” an attorney for the company said in a filing with the court. “The [company] and their advisors are thus devising a strategy to liquidate any remaining retail inventory, and to close any remaining retail stores, once the auction is complete.”
The initial set of closures include locations on M Street in Washington D.C.; Church Street in Evanston, Ill.; 6th Avenue in Seattle; Around Lenox Road in Atlanta; Central Expressway in Dallas; Main Street in Memphis; Pacific Avenue in Santa Cruz, Calif.; Broadway in New York; and Cherry Street in Burlington, Vt.
Those stores are not expected to yield value in a sale and have historically had lower profitability along with more recent poor performance, court documents said. Some have also seen the loss of managers, the company said.
The closures are expected to yield the company about $600,000 in gross sales and would be completed by the end of the year. American Apparel said with the approval of its motion, it may also begin a more aggressive promotional strategy at those nine stores.
Any other store closures are estimated to be completed by the end of April.
On Tuesday, American Apparel’s head of human resources Craig Simmons sent an update to employees assuring them layoffs next months are no longer expected. The company had filed a notice to the state in November, raising the possibility of 3,457 layoffs across its Los Angeles, South Gate and Garden Grove facilities on Jan. 7. That will no longer occur as a result of more recent facilities reviews by prospective buyers, which includes Gildan Activewear Inc. and the more recently emerged Color Image Inc. Gildan, which has proposed buying the company’s intellectual property and some of its assets, has offered $66 million making it the stocking horse bidder in the bankruptcy.