Economy

Once a retail innovator, American Apparel begins winding down

Known for its provocative ads and its commitment to keeping its manufacturing operations in the United States, the now-bankrupt retailer American Apparel says that it has started to lay off its staff.

Trucks line up for shipping from the American Apparel factory headquarters in Los Angeles.
Jonathan Alcorn/Reuters/File
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With hopes fading that it would be able to keep its manufacturing in the United States, the onetime retail-pioneer American Apparel began mass layoffs on Monday.

With new owner Gildan Activewear Inc. withdrawing its initial plan to acquire the Los-Angeles based retailer’s manufacturing plants, as many as 2,400 workers in Southern California were laid off Monday, Reuters reports. 

Gildan said the company is still deciding on the details of its integration plan Monday. It won American Apparel’s brand name and some of its manufacturing equipment in a bankruptcy auction for about $88 million in cash on Jan. 11. 

“[Gildan is developing its] go-forward plans for the brand, including decisions regarding manufacturing, distribution, and go-to-market strategies," company spokesman Garry Bell told Reuters in an email.

The Canadian garment-maker had previously said it would take into account the American Apparel’s "made in the USA" manufacturing heritage – an important component of the brand's image – while also considering factors such as transportation and energy costs. 

American-made is still an attractive label to many US consumers, as Jessica Mendoza reported for The Christians Science Monitor in 2015: 

[T]here is a sub-group of American consumers who do seek out products made in America. Concerns over job losses in the US – as well reports of human rights violations in sweatshops abroad – have spurred a renewed awareness among these consumers of the value of American-made apparel.

In a 2013 survey, 60 percent of respondents said they would buy US-made clothes and appliances even if those cost 10 percent more than versions made abroad; more than 25 percent said they’d pay an additional 20 percent, according to Consumer Reports.

However, Mr. Bell said “it was best” not to assume these leases until the company worked through the plan, according to Reuters. He said more details would be outlined in a Feb. 23 conference call.  

After filing for its second bankruptcy within a year in November, the US fashion retailer was hoping its new buyer would keep its manufacturing plants in the country, insisting these facilities were always a part of negotiations. 

“Any decision by the buyer to not assume these operations is at their discretion,” an American Apparel spokeswoman told Reuters.

Gildan manufactures nothing but socks in the United States, employing close to 90 percent of its 42,000 workers in low-cost Caribbean and Central American countries. 

Bell told Reuters that Gildan has no “apprehension about investing in the United States.” 

While waiting for final decision on its future, American Apparel, once the symbol for the “socially conscious” movement, has been quickly moving forward to shrink business through closings and other agreements. 

The company was able to reach a preliminary agreement with textile manufacture Broncs Inc., last week for its Garden Grove manufacturing site in Orange County, Calif., which will be relaunched as a knitting and dyeing facility. This plan will save more than 300 jobs, American Apparel said in a statement. 

Still, despite Gildan's suggestion that it could be hiring in the areas of design and merchandising, American Apparel will begin laying off about 2,400 workers, according to spokeswoman Arielle Patrick.

Gildan's decision not to acquire the manufacturing plants has raised concerns and new problems for many of American Apparel's manufacturing workers, most of whom are immigrants and many of whom had been receiving benefits from American Apparel, including bonuses and subsidized public transportation. 

“It's really bad what happened here, really bad,” said worker Francisco Morales, who was laid off on Monday, according to Reuters. 

Mr. Morales, who has worked at the Los Angeles plant for seven years and has three children, thinks it will be difficult for him to find another job with the same benefits.

Without any other buyer interested in buying its 110 retail stores, American Apparel has also begun to shut them down. Gildan already indicated it will not take any of them.

The company employed 2,166 people at its Los Angeles headquarters and another 959 at its nearby South Gate manufacturing facility. It is one of the largest private garment-making operations in the US.

This report includes material from Reuters.