Bringing Sexy Back? American Apparel Files For Bankruptcy (Again), Agrees to Major Acquisition

 

It’s been a tumultuous few years for American Apparel. Between their signature NSFW ads, founder and former CEO Dov Charney’s fall from grace, and their ongoing financial trouble, there’s been no shortage of controversy surrounding the apparel company. The latest news? American Apparel has filed for bankruptcy for the second time in 13 months amid a $66 million acquisition by Montreal-based Gildan Activewear Inc.

Much like American Apparel, Gildan is known for their basic (albeit considerably less sexy) wardrobe staples, so the acquisition makes sense from that perspective… and that’s pretty much where the similarities between the two companies end.

So what’s in it for Gildan?

A diversified portfolio

As with many acquisitions, this is a great way for Gildan to diversify their product portfolio. The company (who reported $1.95 billion in revenue last year) also recently acquired Peds Legwear, and in addition to making socks for Under Armour and New Balance, owns many other “foot apparel” manufacturers including Gold Toe and Silks. Adding American Apparel to the mix not only means being able to sell more than just socks, but ups Gildan’s trend factor by several notches. While Gildan won’t be purchasing any retail store assets, consumers will be happy to know that a major component of the deal is to retain American Apparel’s USA-made promise by keeping the manufacturing of its goods in the Los Angeles area.

A broader audience

Despite American Apparel’s struggling sales, the acquisition of such a highly recognized brand will open up Gildan’s access to a much younger (and ultimately larger) demographic. From medically-enhanced socks to itty bitty bikinis, Gildan’s consumer base now spans across every generation. As noted in their release, “The acquisition will create revenue growth opportunities by leveraging Gildan’s extensive distribution network in North American and international printwear markets to further increase the brand’s penetration in the faster growing fashion basics segments of these markets.”

The next step

As part of their Chapter 11 protection agreement, American Apparel may be required to auction off their assets and business. As such, any number of companies could potentially step forward, effectively outbidding Gildan for the company’s acquisition. Gildan is aware of this and, frankly, are pretty confident they’ll come out as the successful bidder.

It’ll be really interesting to see how Gildan takes a brand with such a storied past, and incorporates it into its more conservative portfolio. While American Apparel has certainly seen better days, this is still a great opportunity for Gildan to become a stronger, more well-rounded company. Will they strip American Apparel of its notorious edge or will they continue doing what the brand’s always done best, but under the watchful eye of an already established conglomerate? Only time will tell.

Dayana Cadet

Dayana Cadet

Dayana’s love affair with writing spans all manner of content. As the Content Specialist at Hubba, connecting people to the things they love is where she thrives.

Follow her at @D_isforDayana
Dayana Cadet

Discussion