A Canadian Company Just Bought American Apparel

American Apparel is a Canadian company

American Apparel is an L.A.-based clothing company that makes all of their shirts, pants, and large array of undergarments in America. They pay their workers a fair wage and sell their clothing for a relatively affordable price. For the longest time, they were “cool” to wear by young urbanites (hipsters) and marketed their products with sexy, way-too-revealing advertisements.

Unfortunately, Dov Charney, the Canadian ex-pat founder of American Apparel, was not a pleasant man to work with. Due to the numerous sexual harassment lawsuits against him, the millions the company spent on settling said lawsuits, his misappropriation of company funds, and American Apparel’s sales decline, Charney was ousted from the company. For the next few years, American Apparel tried and failed to increase their sales, and were forced to close many stores and lay off hundreds of workers.

This steep decline inevitable led the company to file for bankruptcy for the second time, and caused the company to auction off nearly everything it owns. Luckily for them, Gildan Sportswear, a Canadian company, stepped in and offered to buy the troubled apparel brand for a song.

Gildan Activewear makes all sorts of clothing items, including shirts, fleeces, and socks.

The company, founded in 1984, is well known for their socks, particularly the Gold Toe brand. They also make Under Armour and New Balance socks as part of a licensing deal. Their products are made in Rio Nance, Honduras, and several islands in the Caribbean.

Gildan is also known for contracting their work out to factories with grueling working conditions and low wages.

Gildan apparel shirt
Flickr/Sarri-Sarri distro & records

The company’s manufacturing partners are constantly cited in studies naming the biggest offenders in workplace safety violations and wage theft cases. Conversely, American Apparel is/was known for their fair wages and — aside from Dov Charney’s harassment — comparatively pleasant working conditions.

Gildan is now the owner of the American Apparel brand.

American Apparel
Flickr/William Murphy

As soon as they receive approval from a U.S. bankruptcy court, Gildan will buy American Apparel’s existing clothes, brand name, and manufacturing equipment for $88 million. They will not, however, own the remaining American Apparel stores, which could be bought by another company…or liquidated and closed down.

American Apparel will technically be a public company once again.

American Apparel
Flickr/Kris Cardenas

American Apparel was delisted from the stock market a few years ago due to Charney’s messy exit from the company and the company’s declining sales. Gildan, however, trades on the New York Stock Exchange as $GIL. (They also trade on the Toronto Stock Exchange). Instead of being a separate stock, however, American Apparel will be part of the $GIL stock.

American Apparel might not be made entirely in America anymore.

American Apparel factory
Flickr/Sam Felder

Gildan will own the company’s L.A.-based manufacturing facility, but they also tend to make most of their clothes overseas. Gildan might eventually find that closing the L.A. facility and shipping production overseas or in a cheaper part of the country could be more cost effective. The L.A. manufacturing is important to American Apparel the brand, and having the brand’s goods produced elsewhere could devalue it.

Should you invest in Gildan? Other than the last year, when their stock decreased in value by over 3%, Gildan was relatively successful on the stock market since their IPO in the late ’90s. They could probably help the American Apparel brand turn a profit by using their 30+ years of knowledge in the apparel market. Whether this means decreasing the quality of the clothes, however, remains to be seen. Also, the popularity of American Apparel is nowhere near where it was several years ago.

If you think Gildan has a strong future not just with American Apparel but all of their brands and endeavors, consider looking into the company’s financial statements and researching further before you decide to invest. If you think buying American Apparel isn’t the greatest investment, you might want to make your investment elsewhere.

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