This week, American Apparel announced that it would be shuttering all of its 110 retail stores, as well as closing its Los Angeles headquarters. Unlike the recent closing of The Limited, which seemed overdue for a company past its heyday, the Los Angeles-based clothier not that long ago attracted a sizeable, youthful demographic with its sweatshop-free, made in the USA apparel and its provocative advertising.
No Surprise as Closures Follow Bankruptcy
The announcement comes in the wake of the brand being purchased earlier this month by Canadian t-shirt maker Gildan for $88 million following American Apparel's filing for bankruptcy protection in 2015. In the agreement between the companies, Gildan, who purchased American Apparel's intellectual property but not its retail operations, allowed for the stores to remain open and for its website to continue to function for 100 days.
Meanwhile, the soon-to-be-defunct company managed to sell its manufacturing facility in Garden Grove, California to Broncs Inc., who will retain the current workforce of 300 people. (With the closing of the stores, it's anticipated that 2,000 people will lose their jobs.)
High Costs and Too Many Stores
American Apparel was founded in 1989, but it wasn't until 1997 that founder Dov Charney moved to Los Angeles and partnered with Sam Lim, selling blank t-shirts wholesale. The pair moved the company's operations to downtown Los Angeles in 2000 and soon after ventured into the retail market. By 2005, American Apparel was ranked 308 on Inc's list of the 500 fastest growing companies in the United States, with revenue of $211 million for the year. The following year, the company went public.
As a retailer, American Apparel had initial success by opening stores in the up-and-coming urban neighborhoods where its demographic lived. However, experts believe they over-saturated the market, with too many stores within proximity of each other burdening the company with rent costs. For example, as of 2008, there were 16 stores in Manhattan alone.
In addition to high operating costs and deep debt, American Apparel's reputation took a hit in 2014 when Charney was accused of sexual harassing employees (he was dismissed soon after by the AA board).
Score Clearance Deals Now as Brand Lives On
Gildan is expected to move the brand's operations to a location with lower costs (i.e. overseas) and to sell American Apparel apparel to retailers like Target and Kmart. With a new manufacturer, it's unclear how quality and design will be affected.
For now, shoppers can get 40% off sitewide at American Apparel. But be careful: All sales are final. A safer bet is Amazon, which is offering some individual American Apparel items even cheaper than the brand itself, and still allows for returns.
Readers, will you miss you shopping American Apparel stores? Will you look for the brand elsewhere? Let us know in the comments.