Why American Apparel Has a Bright, Post-Bankruptcy Future

Enough already with the gloom and doom about American Apparel (APP) and its recent financial and SEC woes. The fact that the L.A.-based apparel chain is headed to bankruptcy is great news. Why? Because a quick trip through bankruptcy is just what AA needs to clean up its act and get its brand selling again.

Here are six positive moves American Apparel could more easily accomplish under cover of Chapter 11 that could help this brand get back on track:

1. Shed excess stores without costly lease buyouts. They'd pay millions on existing leases otherwise. Shutting the stores will cut expenses and help the company make money again.
2. Get debtor-in-possession financing. The company badly needs a cash infusion, and specialty lenders focus on helping retailers stay afloat in bankruptcy that AA can't necessarily access now. Interest rates would be steep, but some institution would probably be willing to collect 15 or 20 percent interest while AA restructures with a court's oversight.
3. Get an independent audit and return to timely disclosures. That should ferret out the improprieties and get AA back to filing accurate and timely financials (the bankruptcy trustee would require this to maintain bankruptcy protection).
4. Get rid of CEO Dov Charney. The man is American Apparel's biggest liability at this point, and he might be shown the door by the bankruptcy trustee, sparing the company the bother of a costly proxy fight by investors who want him gone. Charney's own scandal vortex would likely require his removal for the company to qualify for the DIP financing.
5. Reposition the brand for sale. The move into the preppy look already seems to be shaping up as a major flop -- it's just too far away from what AA has always meant as a brand. Also, their preppy clothes are just plain dull (even the models look unhappy wearing those chub-creating pleated pants). A new design team could possibly do a fun, sexy AA take on preppy attire -- now that might actually work. And dismissing designers in bankruptcy should be cheaper. A cleaned-up balance sheet and streamlined, updated merchandise mix (killing the dated men's underwear above and assless tights while creating desirable new duds) would help attract one of the big clothing conglomerates as a buyer, which at this point appears to be AA's best hope for a second act.
6. Revamp the marketing. American Apparel's marketing devolved this year into total schizophrenia -- a great AA ad slideshow on Flavorwire shows how the first 10 months of this year have featured everything from the company's traditional soft-porn, to three images of dull preppy wear, to a girl wearing granny panties, to unisex workwear, to campaigns with no visible AA clothing in them at all. Someone needs to grab the wheel here, decide with this brand stands for, and then consistently market that. Here's an idea: This brand is made in the USA! Maybe someone could get back to marketing this angle.

Photo via Flickr user SpecialKRB
Related:

• How American Apparel Lost its Ass, and How it Can Get Back on its Feet
• American Apparel's Financial Bailout: Just a Finger in the Dike
• American Apparel Gets the Perfect Investor: Creepy, Savvy Billionaire Ron Burkle
• Why Dov Charney's Controversial Hiring Practices Won't Hurt American Apparel