Interview: American Apparel's Future Under Gildan
Now that the dust has settled a bit on Montreal-based Gildan Activewear's proposed acquisition of Los Angeles-based American Apparel's intellectual property assets and some manufacturing assets, many are left wondering, what now?
To dig deeper into how Gildan Activewear plans to use the American Apparel brand, we spoke with Gary Bell, vice president of corporate marketing and communications for Gildan Activewear, about the brand's future.
One of the biggest questions many have—what will happen to American Apparel's retail storefronts—remains unclear.
"One of the reasons we chose not to include any of the retail operations, stores or operational assets, is because it doesn't align with our current model," Bell said. "There are a lot of opportunities, we believe, on the consumer side, we just don't know what they are right now."
What Bell is sure of is that the American Apparel brand and product offering slots in with its current stable of brands quite nicely.
"For right now, we see a natural synergy with our [printed apparel] business," Bell said. "Gildan, similar to American apparel, has two businesses. Our biggest business is in the printwear and promotional apparel channel. We have not only the Gildan brand, we own the Anvil brand, and we distribute [and own] Comfort Colors as well. For that particular side of our business, we distribute to 50 markets in the world. And the fact that American Apparel is already in that business, there's a natural fit there."
Bell said that American Apparel, like Gildan Activewear's other brands, has a specific role in the company's product line.
"When we purchased Anvil, we redefined what Anvil was," he said. "Anvil is now affordable fashion. Anvil is a little more generous silhouettes. It's fashion for everyone. Whereas American Apparel has been a little bit more fashion-forward and [included] more premium fabrics, premium yarn. We think it complements what we currently have. Obviously, Comfort Colors is that laid-back look. So, really, when you round out our portfolio, we've got basics covered with Gildan. We've got affordable fashion basics with Anvil. [We've got] that retro, very comfortable look and a little bit oversized [fit] with Comfort Colors. And then, American Apparel slots in there as a premium product at a premium price."
While the company has a very specific idea of where American Apparel's brand will fit, it doesn't want to mess with a good thing. After all, there's a reason it was so appealing in the first place.
"This is a great, iconic brand," Bell said. "We're very aware that this is a very significant portion of their brand equity that comes from their fashion forward stylings, but also from their made-in-the-U.S. manufacturing, which we plan to continue. ... We're putting this $66 million price tag on that brand, and things that would compromise what makes up that brand and the DNA of that brand would be misguided on our part. We tend to try to find ways to be able to continue to focus on the strengths of that brand."
Within the last year, Gildan Activewear also has invested about $400 million in U.S. apparel manufacturing. As part of its acquisition, Gildan Activewear would have the right to assume leases on one distribution center and two manufacturing centers in the Los Angeles area, all of the equipment from those facilities, and a portion of the equipment from a fourth facility.
This acquisition wasn't something Gildan Activewear plotted for a long time. While Bell couldn't give specifics, he said it was a bit of a spur-of-the-moment, opportunistic decision to invest even more in domestic manufacturing.
"One of our corporate growth drivers is really to look for synergistic and opportunistic acquisition opportunities," Bell said. "It fits well, and the timing, in terms of the bankruptcy, has made it available to us, and we look forward to, hopefully, being the successful bidder in this process. But, again, it's a process."
On Nov. 30, the courts have to officially accept the bid procedure motion American Apparel's bankruptcy filing. After that, other companies can submit competing offers. If the courts decide that there wasn't an adequate highest bidder, it could go into auction. If that were the case, Bell hypothesized that it would be around Dec. 21. Also, Gildan Activewear would have the option to match any bid that came in.
"We think that, in the end of December or beginning of January, there would be some kind of decision from the court on whether or not it's a go-forward process," Bell said. "And then, unlike many of our other acquisitions, the day that it's announced, whoever is the winning bid, you get the keys that day. And basically, the business starts."
So, while Gildan Activewear is in the lead now, it's not exactly over yet.
"We've got to let the process run its course," Bell said. "We think there's great value in this brand, and it would align very well with our portfolio of brands. That includes our print brands and other brands on the retail side. I think, as a vertically-integrated manufacturer, if somebody can make made-in-the-U.S. and American manufacturing work, I think we can do it very well. We've got a lot of expertise to bring, and we're excited about the opportunity."