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Everything You Need to Know About American Apparel (For Now)

Photo: American Apparel/Facebook

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Will the American Apparel and Dov Charney saga ever, really, truly be over? As long as both are still standing, probably not. For those of you still following along, here's an explainer on where everything stands:

American Apparel Went Bankrupt, Right?

Yes! American Apparel declared bankruptcy last October to stave off the millions in debt that had piled up while the company kept stacking up sales losses in its stores month after month. But it wasn't like a Delia's bankruptcy, where all the stores shut down. Think more along the lines of a 50 Cent or Bloomingdale's bankruptcy, as the company helpfully explained back when the news first broke.

In bankruptcy, American Apparel got relief in all sorts of ways: it came up with a plan to manage its debts, it didn't have to actively work on the multiple lawsuits that Charney and other former employees had filed against it since current CEO Paula Schneider had taken over in January 2015, and it no longer had to answer to Wall Street since it was delisted from the New York Stock Exchange and moved back into private ownership.

However, customers could keep shopping without any interruption, as the terms of the bankruptcy allowed for American Apparel stores to keep operating while it got its house in order. That is, unless those customers frequented one of multiple stores that shut down over the past couple of months as part of the bankruptcy proceedings, including the company's very first location in Los Angeles's Echo Park neighborhood.

Oak, an NYC-based boutique that Charney scooped up for American Apparel in 2013, was designated to be shut down as well, but ended up making it out of the bankruptcy alive and free from the parent company. American Apparel initially said that it couldn't hook a buyer for Oak and therefore had to close it down in order to focus on fixing the core business, but the Oak owners ended up buying their own company back from American Apparel in January for less than $600,000 (the amount of the founders' initial offer submitted in November).

"Would I do it all over again? I can't say I would," Oak co-founder Louis Terline told Bloomberg in a report on the boutique's split with American Apparel. But, Terline noted, "I'm sure Dov has a lot more regrets than we do."

On January 15th, American Apparel finally shut controversial founder and former CEO Dov Charney out of the company seemingly for good. Charney had been plotting a takeover bid for months, convincing a group of investors from Hagan Capital and Silver Creek Lake to pour together $300 million for a buyout offer to counter the plan that American Apparel put together for coming out of bankruptcy alive. But, as it turned out, the stakeholders didn't go for it.

So What Is American Apparel Doing Now?

Now that American Apparel is officially out of bankruptcy, as per an official announcement released last Friday, Schneider plans to steer the company in introducing new merchandise mixes, growing the brand's e-commerce business, developing new ads and marketing initiatives, reorganizing store locations, and getting rid of excess inventory.

"This is the start of a new day at American Apparel," Schneider said in a statement on Friday. "With the enormous debt burden removed, we can now turn our full attention to our strategic turnaround, which will benefit our customers, vendors and employees."

All of these same problems were at the forefront of American Apparel's strategic turnaround plan that the company unveiled last summer; a plan that Schneider heavily promoted in the media.

But, since Schneider has joined the company, she's been faced with dilemma after dilemma in just trying to keep the company afloat, let alone profitable. In bankruptcy court in January, Schneider testified that "every day was ‘Sophie's Choice,'" inside the company. And right outside, a group of American Apparel's factory workers had banded together to form an unofficial union, protesting outside the factory on a weekly basis over cut work hours and pay rates.

Now that bankruptcy has ended, Schneider has promised that American Apparel has a bright future — after it closes more stores in the quest for some stability (finally) this year.

Is Dov Still Around?

Better question: is he ever not around? After the takeover bid went south, Charney posted a final manifesto on Medium saying goodbye to American Apparel and, of course, predicting its death under current management.

A week later, WWD reported that Charney was already pulling together plans to build another company in the same vein as American Apparel with the help of Chad Hagan, one of the investors who backed Charney's failed takeover bid.

"What's important to us now is we're able to form this new venture and put Dov at the helm and we're going to do basics again," Hagan told WWD. The unnamed project will focus on basics, start as a wholesale company, and be manufactured entirely in the US.

On the side, Charney and other former American Apparel employees have already filed notices in court asking that they be allowed to pursue lawsuits against the company again now that it's officially out of bankruptcy. Plus, Hagan confirmed to WWD that there's still another chance to go after American Apparel and reclaim ownership for Charney in its post-bankruptcy state. They'll always be watching.