American Apparel to Launch Retail Store

American Apparel (asi/35297) is getting back into the brick-and-mortar retail business.

The brand, known for its hip fashion basics, plans to open a store in Los Angeles later this year between October and December. The shop will be in a former American Apparel location on Melrose Avenue that once was the brand’s biggest retail space in California. The forthcoming shop will be smaller than its predecessor.

“We're opening one, and that's going to be like a test model store for us, and then we're going to see where that takes us in the future," Glenn Chamandy, CEO of Top 40 supplier Gildan Activewear (asi/56842), told Bloomberg. Gildan owns American Apparel. "We either could franchise, we could open a couple more, we haven't decided yet."

After American Apparel filed for bankruptcy for a second time in 2016, Montreal-based Gildan bought the brand’s intellectual property rights, some wholesale merchandise and some equipment for $88 million in early 2017. Gildan did not buy the former Top 40 supplier’s production facilities or retail stores. All retail locations subsequently closed.

Still, Gildan has been busy trying to spur the American Apparel brand back to prominence. In addition to wholesale channel sales, which include business with the promotional products industry, American Apparel has focused on growing its digital retail presence. In late April, American Apparel announced its clothes were available in 200 countries via its online global store. Bloomberg reported that Gildan expects to generate about $100 million from American Apparel sales in 2018.

Under founder and former CEO Dov Charney, Los Angeles-based American Apparel ran a vertically integrated Made-in-the-USA apparel manufacturing model. These days, Gildan makes most American Apparel items outside the U.S. Some clothes are still produced in the states via subcontractors, but they look the same as overseas versions and cost more. Chamandy said that the U.S.-made garments have failed to draw largescale interest. “The truth is that most people are gravitating to the better value," he said. Charney is no longer associated with American Apparel.