Sealing the fate of an iconic — but flailing (and, over the years, problematic) — made-in-the-U.S.A. brand, American Apparel was purchased at auction yesterday by clothing wholesaler Gildan Activewear after filing for bankruptcy twice in the last two years.
The Canadian company, based in American Apparel founder Dov Charney’s hometown, Montréal, bought AA’s intellectual property rights — meaning, essentially, the right to its branding — and some of its manufacturing equipment for $88 million. Gildan said in a press release that it will separately purchase some of American Apparel’s inventory to “ensure a seamless supply of goods to [Gildan’s] printwear channel.”
The Gildan sale did not include any of American Apparel’s 110 retail locations, however, leaving many wondering where they’ll be able to purchase those oh-so-soft cotton basics.
While AA has famously manufactured its products in Los Angeles since 1997, 90% of Gildan’s employees are located overseas, mostly in the Caribbean and Central America. And according to the Los Angeles Times, it’s expected that Gildan will lay off the majority of AA workers in Southern California; American Apparel preemptively warned 3,500 employees in December about the possible layoffs.
Things have been going south at American Apparel for the last few years. The company hasn’t turned a profit since 2009 and has been racked by scandal after scandal, leading to the oust of Charney — its founder and CEO — in 2014 and its first Chapter 11 bankruptcy filing in 2015. It emerged from bankruptcy in 2016 but filed again in November that year with a debt of $177 million.
That filing marked the beginning of the bankruptcy court-supervised auction of American Apparel, starting with a purchase bid of $66 million by Gildan. The Canadian company upped its bid after retailers including Forever 21, Amazon.com, and brand licensor Authentic Brands Group expressed interest, ultimately winning the auction.
The sale will be reviewed in bankruptcy court on Thursday, and Gildan says it expects to complete the transaction by early February. After that, the future of American Apparel is uncertain.