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5 Reasons American Apparel Is on the Path to Bankruptcy

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From the Financial Post's story American Apparel a hipster darling no more as bankruptcy looms:

"Dov Charney is at the moment of truth," said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm based in New York City. "And all roads for him lead to hell. He's got to pick the best of the worst choices."

Dov Charney is the controversial CEO of American Apparel, the US's largest remaining apparel manufacturer. Dov is reportedly very hands on when it comes to clothes and, reportedly his female workers. I wrote about AA in my book Where Am I Wearing? as an option for engaged consumers who are looking to support American-made products.

But recently the company's stock has fallen lower than the necklines of their T-shirts -- 66%. It's doubtful that the brand will go away, but it sounds like they might be in for a restructuring and that likely means Dov will have to go away. This is a shame. Despite his alleged transgressions, I hate seeing someone forced from doing the something that they love.

That said, why is American Apparel in this position? Here are five reasons:

1) Sex Sells except when it doesn't
No company has taken the advertising mantra "sex sells" to the level of American Apparel. I mean really, does anything say "come shop here and you'll get laid" more than this?

American Apparel sells T-shirts, socks, and everything in between, but most of their ads feature women barely wearing anything. I've never seen a copy of their catalog, likely because they are stuffed beneath the mattresses of every 13 year-old boy from here to Tuscaloosa. If men bought and wore pantyhose, this ad alone would keep them out of bankruptcy.

Unfortunately, women buy pantyhose.

The fact that their ads are oversexed (and Dov, the face and crotch of American Apparel is too) could have contributed to their decline.

2) Don't mess with Woody Allen

AA ran an ad with Woody Allen in it without his permission. Allen sued and won. Now AA is breathing it's last breath. Woody Allen is still doing fine. Just saying...

3) A referendum on mustaches

Need I say more?

4) Garment workers aren't supposed to be paid a decent wage

Last year AA had to layoff 1,500 workers under threat of a raid by the federal government to investigate claims of illegal immigrants working.

Illegal or not, the workers were paid a respectable wage with respectable benefits. American Apparel workers made American Apparel products. This is something unheard of today. There's no such thing as a GAP garment maker. The folks who make GAP work for some other factory in faraway places.

Maybe it's economically impossible for a brand to actually make something other than a commercial in today's market.

5) Too cool for school

I own two of their collared shirts and a few of their T-shirts. However, much of what they make is too cool, too fushcia, too (dare I say) ball hugging for me. I don't know a single guy that owns a pair of pink pants, let alone pink briefs.

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Which if any of the above factors played a roll in American Apparel's troubles? I can't say. Regardless, we live in a world where engaged consumers have limited options already. The loss of American Apparel would limit them even further.

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