Report: American Apparel Hires Investment Bank, Explores Sale

Sources say that top 40 supplier American Apparel (asi/35297) has hired investment bank Houlihan Lokey to explore a sale, as reported by Reuters. The news comes six months after the apparel company came out of Chapter 11 bankruptcy, and almost two years after the ouster of controversial founder and CEO Dov Charney.

“As we have regularly communicated to employees, vendors and customers, we continuously evaluate strategic alternatives,” said American Apparel, which is now owned by its former creditors, in a statement. Houlihan Lokey refused to comment.

Charney told Reuters he would examine the company’s asking price before making a bid, adding that he is currently developing a new apparel entity. With support from several investors, Charney made an unsuccessful bid to the tune of $300 million for his former company this past January.

Also according to multiple reports, American Apparel is considering moving its manufacturing from downtown Los Angeles to an area of the country with lower wages. Tennessee, North Carolina and South Carolina were all mentioned. Each state has a minimum wage of $7.25, less than half of the $15 minimum wage that California is expected to increase to by 2020. The lease on American Apparel’s Los Angeles facility, its largest location, expires in 2019. The Los Angeles Times reported that even with a move, the company would plan to keep its headquarters and design offices in Los Angeles.

In April, CEO Paula Schneider told the Los Angeles Times there was a possibility that some garments could be outsourced to other American manufacturers, though she stopped short of stating that the company would be leaving the city. At the time, American Apparel was laying off approximately 500 workers as part of what Schneider called “a redesign of our production process” in a letter to employees. The company has also recently closed a dying facility in Hawthorne, CA, and a location responsible for knits, located in Los Angeles, will close in October.

American Apparel ranks 14th on Counselor’s list of top 40 suppliers, with estimated 2015 revenue of $98.5 million.