American Apparel to close all US stores, backs off purchasing manufacturing facility.
After years of financial turbulence, American Apparel will finally be shuttering all American stores and the brand’s LA headquarters. Canadian apparel manufacturer Gildan Activewear Inc purchased American Apparel’s intellectual property and manufacturing equipment several days ago for $88 million, and has chosen to discontinue American Apparel's American brick-and-mortar presence.
Montreal-based Gildan has also withdrawn its initial plan to buy some of the bankrupt U.S. fashion retailer's manufacturing operations, according to Reuters. It had previously indicated it would assume some of these facilities, which had made the brand synonymous to "Made in the U.S.A."
While American Apparel always proudly made all garments within the United States, Gildan uses offshore production methods for the manufacturing, opting for low-cost production in South America and the Caribbean. While Gildan does have yarn-spinning and distribution facilities in America, the only garment that is manufactured in the United States is socks.
"The company issued a WARN Act notice several months ago, letting employees know that depending on the buyer of the business, a sale could result in eventual shrinkage of some business areas," American Apparel said in a statement.
"The company is pleased that it was able to secure a second agreement with (textile manufacture) Broncs, which plans to save over 300 jobs when they take over the Garden Grove facility," the statement added.
Many of the 2,166 employees at the company's headquarters in Los Angeles and 959 employees at the nearby South Gate manufacturing facility now stand to lose their jobs, Reuters reported through a source, who asked not to be identified disclosing these details to the media.
Gildan had already indicated it would not continue operations of American Apparel’s 110 locations across the United States, leaving 3,400 store employees out of work.
Garry Bell, a Gildan spokesperson told the press, "We felt it was best to not assume these leases while we worked through that plan.” Analysts predicted that any future American Apparel clothing endeavor will most likely be sold through department stores and wholesale.
American Apparel first filed for bankruptcy in November of 2016, after a brand turn-around implemented after American Apparel’s first chapter 11 filing in October 2015 failed and the company was left $177 million in debt.
The American Apparel LLC auction attracted some serious competition in the buying department, with Amazon.com Inc and Next Level Apparel placing bids for the American retailer.
Close to 90 percent of Gildan's 42,000 employees are Caribbean and Central American countries where costs are lower, and the company does not manufacture clothes other than socks in the United States.
Gildan had previously said it would take into account that American Apparel's U.S. manufacturing heritage is a component of the brand, but had noted that its manufacturing plan would also consider factors like transportation and energy costs.
Gildan did not immediately respond on Monday to a request for comment.
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