American Apparel files for second bankruptcy protection

US fashion retailer American Apparel has filed for its second bankruptcy protection order in just over a year. It comes after the ailing fashion brand appointed UK administrators to wind down its 13 British stores last week.

The move is part of the Los Angeles-based firm's plan to continue trading while it negotiates a sale to Canadian rival Gildan Activewear for $66m (£53m).

Gildan said it wants the rights to the American Apparel brand and stock, but will not take on its stores. The business runs around 200 stores in 11 countries, and filed for Chapter 11 bankruptcy protection on November 14.

American Apparel, known for racy advertising and legal battles with founder Dov Charney, only emerged from bankruptcy in February. In recent years the brand has faltered under weak sales and large debts.

American Apparel filed its first bankruptcy in October 2015, following a steep drop in sales and a drawn-out legal battle with Charney, who was ousted in 2014.

The retailer emerged from bankruptcy this year under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital.

But it continued to face falling sales, exacerbated by its costly manufacturing plant in Los Angeles. Under mounting pressure, American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale.

UK Christmas trading

In the UK administrators KPMG said American Apparel's UK shops, which employs just under 200 staff, will continue to trade until after the peak Christmas period before looking for a buyer for the outlets.

Jim Tucker, joint KPMG administrator, said: "While the UK business is not part of the US sale, a number of the UK stores are in prime High Street locations, and we will also aim to sell individual stores following the Christmas trading peak."

Gildan said it would grow the brand by "leveraging Gildan's extensive distribution network in North American and international printwear markets".

The Canadian firm's other brands include Kushyfoot, Secret Silky and it also makes socks in America under licence for US sportswear business Under Armour.

American Apparel was launched in 1989 by its controversial founder Dov Charney, who repeatedly attracted a number of sexual harassment lawsuits from female staff.

At its height the firm employed over 4,000 staff in its downtown Los Angeles factory and was known as the largest clothing manufacturer in the US.