What ever happened to American Apparel? – Glossy

In the early aughts, Los Angeles-based American Apparel seemed to have it all, offering a heavy dose of sex appeal on top of its domestic production and palatable prices. The company still exists today, though it’s no longer under the reins of its notorious founder, Dov Charney; Canadian company Gildan Activewear, Inc. acquired the company in early 2017.

When Gildan bought American Apparel after its second bankruptcy filing, it had plans to revive the storied brand, including at least a portion of its U.S.-made ethos. But American Apparel’s new “Made in USA” shop, which launched on its website in 2017 with a selection of the brand’s most popular items, quietly began to vanish in 2019.

In March of that year, the website began to make it less obvious which items were made in the United States versus elsewhere. By October, the site’s Made in USA shop contained only four articles listed in product descriptions as made in the U.S.

In January 2020, the Made in USA shop tab disappeared altogether. What’s left behind is just a shadow of the brand American Apparel used to be, and what a generation of shoppers may view as just a cheaper, foreign-made copy of itself.

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Dov Charney founded American Apparel in 1989, but the brand didn’t become a household name until it added a retail component to its wholesale slate of imprintable T-shirts and other basics. When its stores began to proliferate in 2004, the company was known for its long-wearing separates as much as the hypersexualized nature of its marketing, an element that was often scrutinized during the brand’s heyday. 

While the company’s advertising campaigns caught the eye of teens and millennials, its Made-in-USA marketing did, too, said Nioka Wyatt, director of the fashion merchandising and management program at Jefferson University in Philadelphia. 

“So many other companies [focused on going offshore], and here it is, this one main company targeting this group of consumers that was interested in goods that were made in the USA. It helped their marketing strategy and their bottom line,” she said. “ They were an icon in selling that made-in-USA model.”

At its height, American Apparel had more than 250 stores worldwide and reported annual revenue of about $630 million. 

But its founder’s alleged misconduct, its advertising methods’ backlash, its strained relationships with its creditors and its slumping sales sent American Apparel into an eventual tailspin.

The board of American Apparel ousted Charney in 2014 amid sexual misconduct allegations. In October 2015, the company filed for Chapter 11. A second bankruptcy filing took place 13 months later. American Apparel had not made a profit since 2009, according to its initial bankruptcy filing. More than 100 stores worldwide closed in early 2017.

Canada-based Gildan purchased American Apparel at auction for $88 million. It was a purchase that made sense to analysts at the time — Gildan is a major player in the T-shirt business, selling its own imprintable basics alongside private-label activewear and hosiery. Along with American Apparel, it owns t-shirt brand Anvil and PEDS Legwear.

Gildan was founded by Glenn Chamandy in 1984 with a similar homegrown, scrappy vibe as Charney, who is also Canadian. By 2001, it was a top brand in the U.S. printwear market, according to a ranking by Nielsen. In 2018, shortly after the American Apparel acquisition, Gildan had more than 50,000 employees at its manufacturing facilities, primarily in Central America.

In several of the early post-acquisition earnings calls with investors, Chamandy spoke extensively about relaunching American Apparel’s e-commerce site and focusing on direct-to-consumer growth for the brand. 

“I can’t tell you how big it’s going to be, because if I told you, I’d make you a little nervous. But at the end of the day, we think it’s quite a large opportunity for the company as we go forward,” he said during a third-quarter report in late 2017, estimating that American Apparel’s sales would “be up 500% next year.”

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But when it revived the label online in August 2017, Gildan’s version of American Apparel offered an unusual option to shoppers.

Some of American Apparel’s most popular items were offered in two versions: U.S.-made, or “globally made,” which at the time almost guaranteed your shirt would be made in Honduras, Gildan’s largest manufacturing hub. 

“Both are sweatshop free. Identical in quality. Different in price,” a graphic at the top of the American Apparel “Made in USA” shop declared. “We are sweatshop free and ethically made regardless of location. You decide.” 

At relaunch, American Apparel offered eight U.S.-made styles — all cotton or cotton-blend tees, tanks and hoodies for adults, plus one T-shirt option for kids. There were 20 listings total between the U.S.-made and globally made options. 

The American-made tops were priced at a premium of $4-$10, depending on the item. The globally made T-shirts cost $18-20.

But over those nine months in 2019, the “Made in USA” shop grew anemic, with fewer and fewer American-made styles clearly labeled. American Apparel had a series of deep-discount sale periods around the 2019 holiday season, before announcing on its website in January 2020 that it was moving all e-commerce operations to Amazon. That same month, the Made in USA shop vanished completely from American Apparel’s website.

Shoppers are now invited to browse on American Apparel’s site before clicking through to complete their purchase on Amazon. Still, as of January 2021, only four items are available in the “Made in USA” store once shoppers get to Amazon, and applicable products aren’t called out on American Apparel’s online catalog. 

Only 4 American-made styles remain for online shoppers
The move to Amazon, a Gildan representative confirmed, is part of Gildan’s “Back to Basics” strategy to streamline operations. Over the course of 2019 and into 2020, it closed its own shipping operations for individual pieces, and dropped “overlapping and less productive styles and SKUs between brands,” according to the Gildan’s 2019 annual report. 

A Gildan spokesperson confirmed that four American Apparel U.S.-made styles are currently available to consumers via Amazon. The reason? That customer-choice experiment Gildan started when it relaunched American Apparel provided valuable intel about consumer buying patterns. 

“When given a choice, consumers tend to purchase the less expensive option, given that the product is basically the same. That’s why we’ve decided to focus on a tighter assortment in the retail channel,” said Geneviève Gosselin, director of corporate communications and marketing at Gildan.

Wyatt says the perception that lower-quality clothing gets made in China and other countries has flipped in recent years. Advancements in production have put foreign manufacturing on par with American production, at least in the eyes of consumers. And shoppers are more willing to buy across borders — think Amazon alongside Alibaba. 

Meanwhile, additional players like Royal Apparel, Bella + Canvas and American Giant have entered the American-made T-shirt scene, putting less pressure on firms like Gildan to maintain levels of U.S. production that aren’t as profitable as offshore options.

“If they can figure out a way to sell product and get better margins, who’s not going to do it?” Wyatt said.

But the transition from American Apparel’s e-commerce site to its new home on Amazon can be confusing for shoppers. The “Made in the USA” tab of the Amazon storefront contains several variations of just four products: two T-shirts, a hoodie and a raglan three-quarter-sleeve tee. If you don’t scan the listings on the U.S.-made collection or go directly to that page—say, you click on the raglan tee on American Apparel’s website—you’re directed to Amazon’s listings for the imported versions of those shirts.

That confusion is evident in some of the Amazon reviews from self-proclaimed fans of the brand. While a few reviews from the early days of Gildan’s takeover indicated skepticism about the authenticity of the products when shirts made in Central America arrived, others more recently lamented the difference between the new iteration of the brand and what they had previously loved about it. 

“This shirt doesn’t even resemble a genuine American Apparel shirt,” a reviewer named Ethan wrote in June 2020. “The fit is large, the cut is generic and not at all like an AA fit, the material is heavy and thick, even the color is off from my other AA shirts.” 

In July 2020, another shopper wrote that the crewneck tee they’d been a fan of for years just wasn’t the same. “They have added side seams to the design,” shopper RL wrote. “I loved these shirts when they had no side seam. The change would not be a big deal, but the quality of this new shirt is so low, there are threads hanging out all over the seams.” 

That customer asked for recommendations for Made-in-America brands that make shirts “the way [American Apparel] did five or 10 years ago.” 

The situation is different for wholesale shoppers, who can still choose from eight of the U.S.-made products Gildan initially revived, according to Gosselin. 

But wholesale buyers are typically businesses who print their own designs on apparel or provide the service to other businesses. Bulk wholesale offerings don’t do much for a shopper looking for a solid-color tee. They’re likely to seek out alternative options for U.S.-made clothing.

Screen Printers Have Other U.S.-Made Options 
As more American-made T-shirt manufacturers have launched, some printers’ attention has drifted to other options.

Torrey Valyou, CEO of New Duds Screen Printing in Colchester, Vermont, estimated that in American Apparel’s original iteration, the brand’s items made up 30-40% of what his company was ordering. Now, in the Gildan era, less than 2% of what he orders has American Apparel tags. 

“They disappeared for eight months,” Valyou said of the gap between American Apparel shutting down and Gildan relaunching it. Once he could begin to order American Apparel again, he noticed limited colors and reduced U.S.-made options. “We had already transitioned away” to some of the other U.S.-made options, including New York-based Royal Apparel, Valyou said. “So we didn’t really need to transition back.” 

Similarly to Valyou, JC Smith sought out American-made options when he co-founded his Washington, D.C.-based company, Bailiwick Clothing, in 2016. “I wanted the best quality, and American Apparel had it,” he said. The fact that the brand’s workers made a living wage nearly made up for founder Dov Charney’s shenanigans,” Smith said.

But by the end of Bailiwick’s first year in business, Smith said he saw quality decrease as American Apparel unraveled in the wake of its second bankruptcy filing. And he noticed fewer American-made options as Gildan took over the company. He started looking for other options for the blank shirts he purchased. Now, the brand uses just one American Apparel shirt in its lineup of about 40 styles: the raglan baseball tee, which Smith said is made in Honduras. 

“They’ve cut so many SKUs,” Smith said. “It’s only the basics now: grey, black, white, navy,” he said, regarding U.S.-made American Apparel shirts. Meanwhile, popular wholesale shirt brands Bella & Canvas and Next Level both offer dozens of American-made styles and color options. 

“Right before [American Apparel moved] completely to Amazon, they were having some fire sales,” Smith said. He stocked up on retail items that had been discounted to wholesale-level pricing. But when he tried to print designs on the marked-down shirts, made in Honduras, Smith and a colleague found the pieces didn’t hold up to the heat of the printing process. “You can tell it’s so much different than the old ones,” he said, looking through the shirts still stacked up in his home office.

Checking the tag of an American Apparel varsity style jacket he also picked up online at a deep discount, he said, “Made in China.”

Gildan has several yarn-spinning facilities in the United States, but no textile or sewing facilities. Most of Gildan’s manufacturing takes place at its factories in Central America, but it has recently started expanding its footprint in Bangladesh. 

More than 40% of American Apparel styles are manufactured in Gildan-owned factories, Gosselin said, noting that the majority of American Apparel sales come from products made in those facilities. Smaller-run products and denim are made by third-party manufacturers who meet Gildan’s labor standards, she said. 

This may have been Gildan’s plan all along
While Gildan’s commitment to American Apparel seems perfunctory at best, it may be by design. 

When clothing brands buy one another, it’s often not about the clothing itself but about the intellectual property it can gain, sometimes at a bargain. Consider Walmart’s short-lived acquisition of ModCloth, or Michael Kors’ purchase of Jimmy Choo and Versace. 

Gildan likely knew it would never fully revive American Apparel as an American-made brand, choosing instead to continue producing its styles and using the manufacturing techniques it had honed.

“Really, what we bought is a brand,” Gildan CEO and cofounder Glenn Chamandy said during an August 2017 earnings call with investors, explaining the purchase included $10 million worth of inventory. “At the end of the day, the way we approached American Apparel was almost like we licensed the product. We just happened to buy the asset instead of licensing the asset.” 

At that time, Chamandy spoke extensively about relaunching American Apparel’s e-commerce site and focusing on direct-to-consumer growth for the brand. 

In early 2018, the sky seemed to be the limit for American Apparel’s growth potential. After sales of $50 million in 2017, Gildan expected American Apparel to have $100 million in sales in 2018. But by late summer, those projections were starting to cool. 

The company confirmed in early 2019 that American Apparel’s sales run rate for the previous year was “approaching $100 million.” That’s a small slice of the Gildan pie — the company’s total 2018 revenue was 2.9 billion. 

At no point after 2018 were American Apparel’s sales highlighted in a Gildan investor presentation or quarterly earnings call. To make tracking the brand more complicated, in 2018, Gildan changed the way it reported sales in its printwear category, which had included American Apparel, by rolling it into combined sales for printwear and branded apparel. 

“As we integrated the American Apparel business within the existing Gildan operations, and for competitive reasons, we have ceased to break out specifics” for the brand, Gosselin said. During the year, the company declined to share American Apparel’s 2020 projections, and its Q4 results won’t come out until February. But it said it continues to focus on growing the brand.

This may have been Gildan’s game from the start: Buy a failing company’s designs, rights and inventory, sell as much of that inventory as possible, and then figure out how best to invest from there. 

It’s true that American Apparel’s origin story is tarnished, and that consumer sentiment toward its founder soured around the same time that alternate options for domestically made clothing were gaining traction.

But for fans of the label, all that’s left of American Apparel is a replica with a name that no longer fits the brand.