American Apparel May File for Bankrupcy

After posting losses of $86.3 million in 2010, the controversial clothing chain may be forced to file for Chapter 11 bankruptcy.

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Plagued by financial and legal woes, American Apparel is on the verge of filing for bankruptcy.American Apparel, the clothing retailer known for its sexually provocative advertising, may be forced to file for Chapter 11 bankruptcy if it can't find a way to increase sales or other sources of financing.

The brand has been struggling financially over the past year, and last week reported a fourth-quarter loss of $19.3 million, compared to a net income of $3 million a year ago, according to the Associated Press. Overall, in 2010, the company suffered a total loss of $86.3 million. American Apparel also indicated that even if it does file for bankruptcy, the company may be forced to liquidate if it cannot put together a reorganization plan or find bankruptcy financing. The company has been in danger of filing for bankruptcy before, but was bailed out by its investors. Last October, it also escaped being delisted by the New York Stock Exchange.

In addition to financial troubles, the brand has recently been plagued by two sexual harassment lawsuits. Last month, a former employee sued American Apparel founder and CEO Dov Charney for $250 million, alleging that he sexually abused her. The outcome of these lawsuits is still pending, although Charney maintains that any sexual relationships he has had with female workers were consensual. According to reports, the company expects the lawsuit will ultimately be tossed out because the former employee signed an agreement to settle disputes in arbitration when she left the company.

Tags: American Apparel bankruptcy, American Apparel financial trouble, Dov Charney, Dov Charney sexual harassment, News

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