E-retailer Amazon is one of several major brands that may pursue an offer this week to acquire American Apparel (asi/35297), according to a report from Reuters. If Amazon does make a winning bid, it would represent a significant move into branded clothing for the Seattle-based firm and likely give it a new, established group of physical stores to sell products in.
Along with acquiring Zappos in 2010, Amazon has launched its own fashion brands – including Franklin & Freeman, Scout + Ro and Society New York – but none of these labels have near the cachet of American Apparel. While analysts have speculated an Amazon deal would save the jobs of approximately 3,500 American Apparel workers, it is still unclear how Amazon would use the manufacturer’s facilities.
Other companies reportedly considering acquisition bids include Forever 21, Authentic Brands Group LLC and Next Level Apparel (asi/73867). Any bid would have to top a standing $66 million offer from Gildan Activewear (asi/56842) – a figure American Apparel agreed to when it filed for bankruptcy in November. American Apparel will be sold at an auction that is scheduled to begin with final bids tomorrow, although it appears unlikely a formal acquisition announcement will be made until next week. Gildan has not indicated if it will raise its current bid to stave off competitors, but a spokesman said Wednesday that the firm is doing its “due diligence to best position itself in the auction.”
As part of the standing agreement, Gildan would acquire American Apparel’s intellectual property rights and wholesale inventory, and has the option of retaining American Apparel’s Los Angeles-based manufacturing and distribution centers. While Gildan is not expected to acquire American Apparel’s retail stores, Gildan has said that it will explore the idea of incorporating American Apparel into one of its current segments – one that sells to consumers through other retailers. Gildan’s consumer brands include Gold Toe, Secret and others.
In an exclusive interview with Counselor in November, Brad Gebhard, American Apparel’s president of global wholesale operations, said the company was looking for a buyer familiar with the apparel industry and managing brands, as well as one that can provide additional capital and collaborate on a strategic plan that will map out American Apparel’s future. The Los Angeles-based manufacturer has endured tumultuous times of late, riddled with everything from rising labor costs and plummeting retail sales to a long-standing feud with former CEO Dov Charney. In December, the company warned employees in California that they may lose their jobs as early as this month, depending on the outcome of the auction.
In its bankruptcy filing, American Apparel reported that its wholesale business – one strengthened by the promo market – generated approximately $167.42 million in revenue in 2015. American Apparel reported total North American promotional product revenue of $98.56 million in 2015, making it the 16th largest supplier in the industry.