The edgy United States-based brand, American Apparel, which was purchased by Gildan Activewear for $88 million, will be shutting down all of its 110 stores in the United States. The brand will also close its distribution center in La Mirada and production facilities in Garden Grove and South Gate.
Gildan Activewear bought American Apparel brand’s intellectual property and a portion of its manufacturing facilities. It means that the factories’ 3,500 employees and retail staff are no longer needed.
With the outstanding marketing strategy and provocative ads, Los Angeles-based brand American Apparel managed to gain big success within the United States and become famous worldwide, while many brands were running overseas in the middle of 2000’s. American Apparel sold it’s intellectual property at the bankruptcy auction to Canada-based Gildan Activewear after a 20 years of being one of the biggest U.S. garment makers.
However, although it was one of the most successful brands and biggest U.S. garment makers for 20 years, American Apparel sold the brand in a bankruptcy auction to Canada’s Gildan Activewear.
American Apparel filed for bankruptcy two times in last two year. Although the brand hired a new CEO back in 2014, it was not enough to help fix the damage done to the company after the founder of American Apparel, Dov Charney was accused of sexual harassment.
Gildan Activewear bought American Apparel’s IP for $88 million and a part of its manufacturing equipment. However, Gildan Activewear is not interested in American Apparel’s 110 retail stores in the United States, distribution center or production facilities.
“This was always about buying assets out of bankruptcy,” Gildan spokesman Garry Bell said. “The reality is this wasn’t a purchase of an ongoing concern.”
A lot of Gildan Activewear business is affordable basic pieces that can be screen-printed. The company saw an opportunity in American Apparel to create a premium fashion brand that will go along with the print-wear business of Gildan Activewear.
“This company has been a dead man walking for over two years. It’s a casualty of gross mismanagement at the top and missing-in-action board governance,” said the president of research firm Customer Growth Partners, Craig Johnson.
Two days ago, the closing of the stores and factories began. 2,400 employees are out of the job since Monday and the status of the rest 1,000 employees is yet unknown. Former employees lined up outside of the company’s factory in Los Angeles to receive their final checks. Founder of American Apparel, Dov Charney, said he will hire a few American Apparel’s employees for his new T-shirt business, but not near enough to employ all the former workers.
“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 has been in constant written and verbal communication with employees, letting them know how the sale process has been going all along, and what to expect. Because American Apparel cares deeply about its employees and their futures, the company has been offering high-quality career mentoring and a resource center, and a job fair to all employees at no cost to them, on-site for the past several weeks. They are still able to take advantage of these resources today,” a company spokeswoman said Monday.