2017 Newsmaker: American Apparel Reaches the End of an Era With Sale to Gildan Activewear of Canada

Manufacturing

As of Friday, December 8, 2017

The American Apparel brand was born in Los Angeles when Dov Charney set out to make a basic T-shirt manufactured in Los Angeles by workers who received a fair wage and benefits.

American Apparel’s business took off, eventually employing thousands of workers in an old building near downtown Los Angeles’ produce markets. At one point, annual revenue rose to $634 million.

But the company hit a roadblock when federal immigration officials stepped in to verify if everyone on the payroll had legal documents to work in the United States. The inspection resulted in American Apparel in 2009 having to lay off 1,800 workers—or one-quarter of the factory workforce—who could not prove they were in the country legally. It was difficult to hire replacements quickly and production suffered.

More financial problems ensued. In late 2014, Charney was fired by the company’s board of directors, and his job as chief executive officer was turned over to Paula Schneider. But the new American Apparel executives had a tough time righting the ship. With major loan payments due, the Los Angeles clothing manufacturer filed for Chapter 11 bankruptcy protection in 2015. It quickly emerged from bankruptcy but turned around in late 2016 to file for bankruptcy protection again.

While the company was in bankruptcy, several companies bid for American Apparel’s brand name. The winner was Gildan Activewear, a Canadian clothing manufacturer whose labels include Alstyle Apparel, Anvil, Golden Toe and Peds. It bid $88 million to buy the company’s intellectual-property rights plus some American Apparel merchandise and equipment.

Gildan decided not to keep the 3,400 American Apparel employees who worked in the brand’s large factory. They were laid off early this year and 110 American Apparel stores later closed their doors.

Gildan is now using a few Los Angeles contractors to manufacture American Apparel clothing for consumers who want a “Made in USA” label, but most of the collection is being manufactured in Honduras, where Gildan employs 25,000 workers.