Although Amazon and Forever 21 both reportedly showed interest in bidding on American Apparel during its bankruptcy auction, Canadian apparel manufacturer Gildan Activewear won the rights to the brand after raising its offer to $88 million.
Gildan will not take on any of American Apparel’s 110 stores, but will own its intellectual property and assume some of its manufacturing operations in California, according to Reuters. American Apparel will need to find a separate buyer to take over the stores in order for them to remain open.
Gildan also will separately purchase inventory from American Apparel to ensure a seamless supply of goods to its printwear channel.
“The American Apparel brand will be a strong complementary addition to our growing brand portfolio,” said Glenn Chamandy, President and CEO of Gildan in a statement. “We see strong potential to grow American Apparel sales by leveraging our extensive printwear distribution networks in North America and internationally to drive further market share penetration in the fashion basics segment of these markets.”
Although Gildan intends to integrate American Apparel into these distribution networks, the once-controversial apparel retailer’s future remains uncertain. American Apparel can keep selling clothes in stores and online under a 100-day license, but Gildan isn’t obligated to retain any of the retailer’s employees, according to Gildan spokesperson Garry Bell.
Gildan makes most of its garments offshore, with nearly 90% of its 42,000 employees working in low-cost Caribbean and Central American countries. In the U.S., the manufacturer has yarn-spinning and distribution centers in cheaper labor states such as North Carolina and Georgia. So while American Apparel initially thrived when it made products within its California roots, Gildan could possibly shift the production to another site at a later date.
Whichever direction American Apparel goes, Gildan is giving the retailer another chance to find the success that it was previously unable to capture on its own. Despite a turnaround effort led by then-CEO Paula Schneider in 2015, American Apparel continued to see deteriorating sales to the point where it had $177 million in debt.
The activewear brand initially made a stalking horse bid of $66 million when American Apparel filed for its second bankruptcy in November 2016. But Gildan faced major competition from Next Level Apparel, forcing the company to up its bid. The deal is subject to approval from a bankruptcy court on Jan. 12.