What happened to American Apparel?

The company filed for bankruptcy in October 2015 and then again in November 2016. Almost 2,500 employees were terminated in January 2017 as the company began shutting its factories and over 100 stores worldwide. 


American Apparel is a former bricks-and-mortar fashion retailer now available exclusively online.

The company was founded in 1989 by Canadian businessman Dov Charney. At its peak, the retailer was synonymous with provocative advertising, hipster-cool fashion, and supporting social issues around immigration and LGBT rights. 

American Apparel also manufactured its products in Los Angeles. It became celebrated for paying its workers a proper wage in an industry notorious for poor working conditions.

Following is a look at how a company championing social issues, worker rights, and with revenues topping $211 million fell from grace.

Sexual harassment lawsuits and company culture

By 2007, three former employees had filed sexual harassment lawsuits against Charney alleging he had used crude language and gestures in the office and hired women for whom he had a sexual interest.

In one case it was even alleged that Charney conducted job interviews in his underwear. 

Lawsuits became somewhat of a regular occurrence for Charney, with claims of racial discrimination added to the various sexual harassment lawsuits in 2011.

American Apparel was also known for its controversial staff-hiring practices.

Potential employees were required to attach photographs to their applications, with Charney approving or vetoing each application based on perceived attractiveness.

Charney also encouraged store managers to fire any employee they deemed not good-looking enough to work there.

This created a hostile work environment and an extremely toxic culture. American Apparel’s brand image suffered significant and irreparable damage.

Cultural shift

American Apparel became successful by identifying the elements that made hipsters attractive and then recreating that aesthetic in their stores.

But as the hipster counterculture began to lose its allure, so too did American Apparel.

Its customers migrated to fast-fashion retailers such as Zara that had a focus on inexpensive clothing with a high-end, designer-like feel.

Much of American Apparel’s downfall can be attributed to a failure to evolve.

As its competitors expanded their product range, the company stuck with a handful of different styles and never really deviated from its core offering.

Illegal workforce

Despite the company claiming it paid Los Angeles workers a fair wage, an investigation by U.S. Immigration and Customs Enforcement found 1,600 American Apparel employees were not authorized to work in the United States.

Most of these workers were fired immediately, but the brand suffered further damage as the company appeared to contradict its own values around worker rights.

Charney is fired

Charney was fired in 2014 after more claims of sexual harassment and also misuse of company funds.

Distancing Charney from the American Apparel brand was seen as a pathway to future success. However, the company’s rapid expansion until that point meant it had considerable debt with little cash to fund operations.

This was highlighted when it failed to produce enough liquidity to release its new fashion line for the spring of 2015. In response, 40 underperforming stores were closed and worker overtime entitlements cut. 

American Apparel then filed for bankruptcy after revealing it had not made a profit since 2009.

Gildan acquisition

American Apparel was acquired by Gildan Activewear Inc. in 2017 for $88 million after the company filed for bankruptcy for a second time.

Several changes have been instituted by Gildan. Gone are the overtly sexual culture and advertising campaigns which harmed the brand’s reputation. The company also acquired the American Apparel brand but not its stores, so clothing can now only be purchased online.

Much of American Apparel’s clothing range is also sourced from developing nations such as Honduras and Nicaragua and not the United States. 

Key takeaways:

  • American Apparel is an American fashion retailer originally founded by Dov Charney in 1989. The brand championed social issues and locally made products but soon faltered and entered into two separate bankruptcy proceedings.
  • American Apparel was frequently associated with sexual harassment lawsuits filed against Charney by female staff which damaged its brand reputation. The company also lost market share as the hipster counterculture began to weaken.
  • American Apparel was found to be employing illegal workers after a governmental investigation. Charney was fired in 2014 to revive the brand, but mounting debts and a lack of liquidity meant the company would never recover.

Other Failure Stories

What Happened to WeWork

WeWork is a commercial real estate company providing shared workspaces for tech start-ups and other enterprise services. It was founded by Adam Neumann and Miguel McKelvey in 2010. WeWork’s business model was built on complex arrangements between the company and its landlords. There were also several conflicts of interest between Neumann and WeWork, which provided the impetus for the failed IPO and significant devaluation that would follow.

What Happened to Netscape

Netscape – or Netscape Communications Corporation – was a computer services company best known for its web browser. The company was founded in 1994 by Marc Andreessen and James H. Clark as one of the internet’s first and most important start-ups. The Netscape Navigator web browser was released in 1995 and became the browser of choice for the users of the time. By November 1998, it had been acquired by AOL, which tried unsuccessfully to revive the popularity of the web browser. Ten years later, Netscape was shut down entirely.

What Happened to Musical.ly

Musically, or Musical.ly as it is officially known, was a Chinese social media platform headquartered in Shanghai. After passing 200 million users in May 2017, the platform was shut down by tech company ByteDance in November. After its acquisition, ByteDance suggested Musical.ly would continue to operate as a standalone platform. Company representatives noted that it would be able to leverage ByteDance’s AI technology and enormous reach in the Chinese market. Musically was ultimately absorbed into TikTok in June 2018, with the app no longer available in August of the same year. Existing users were offered technical support and several new features as a sweetener.

What Happened to Vine

Vine was an American video social networking platform with a focus on looping video clips of six seconds in length, founded by Dom Hofmann, Rus Yusupov, and Colin Kroll in 2012 to help people capture casual moments in their lives and share them with their friends. Vine went on to become a massively popular platform. Yet by 2016, Twitter discontinued the mobile app, allowing users to view or download content on the Vine website. It then announced a reconfigured app allowing creators to share content to a connected Twitter account only. This marked the end of Vine.

What Happened to CNN Plus

CNN Plus was a video streaming service and offshoot of CNN’s cable TV news network that was launched on March 29, 2022. The service was ultimately shut down just one month after it was launched. Trouble began for the platform when parent company WarnerMedia merged with Discovery. The latter was unimpressed with paltry viewer data and, with $55 billion in debt to clear, was not interested in funding CNN+ moving forward. Other contributing factors to CNN Plus’s demise include a lack of compelling content and streaming service market saturation.

What Happened to Clubhouse

Clubhouse is a social app that allows thousands of people to communicate with each other in audio chat rooms. At one point, the company was worth $4 billion and boasted users such as Mark Zuckerberg and Elon Musk. Clubhouse declined because it rode the wave of pandemic lockdowns and suffered when people resumed their normal routines. The decision to remove the invite-only feature also caused a rapid influx of new members and removed any exclusivity. Clubhouse management also failed to define a business model and was unaware of the components of a successful social media site.

What Happened to Facebook


Main Free Guides:

About The Author

Scroll to Top