Retailer American Apparel LLC filed for it's second Chapter 11 bankruptcy protection (the last one only 13 short months ago) earlier this month. With two bankruptcies under its belt- does this mean the end for the company? Their fate is yet to be decided, as Canadian company Gildan Activewear entered into an agreement to acquire assets and inventory from American Apparel. This gives the likelihood of a chance to maintain at least some of the production and distribution operations.
Why did the first bankruptcy protection not save the company? According to sources, their plan and strategy to turnaround the business failed, and the company reported a 33% decline in year over year sales.
Chapter 11 bankruptcy can indeed save a company in financial trouble, but it in no way guarantees the success of the company the second time around without sound strategy and implementation procedures, as well as demand for the product. However, what bankruptcy does provide is protection from a deep hole of financial debt.
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