American Apparel begins layoffs at HQ, factories

Dive Brief:

As of Monday, American Apparel has begun layoffs for some 2,400 workers at its Los Angeles headquarters and its manufacturing facilities, the Los Angeles Times reports. New owner Gildan withdrew its initial intention to purchase some of American Apparel’s manufacturing operations, and the brand's Los Angeles manufacturing will cease as a result.
The retailer has worked to save some factory shops: American Apparel spokesperson Arielle Patrick told Retail Dive that the company was able to secure a second agreement with Los Angeles area textile mill Broncs, which plans to save more than 300 jobs when they take over the retailer's Garden Grove manufacturing facility. She also said that American Apparel has been in constant written and verbal communication with employees, letting them know how the sale process has been going all along, and what to expect.
Canadian T-shirt maker Gildan, which won the rights to the American Apparel brand and some of its inventory with its $88 million bid at the company’s bankruptcy auction last week, declined to buy the company’s U.S.-based manufacturing operations. Gildan had already declined to take on any stores, and no buyer emerged for those leases.

Dive Insight:

Gildan sources most of its textiles in overseas factories and some in lower-cost southern U.S. textile centers, signaling a loss for U.S. apparel manufacturing, especially in the high-cost apparel production in Southern California where American Apparel’s manufacturing took place.

Patrick told Retail Dive that American Apparel issued a WARN Act notice several months ago, letting employees know that depending on the buyer of the business, a sale could result in eventual shrinkage of some business areas. To help workers, the company has been offering high-quality career mentoring and resource center, and a job fair to all employees at no cost to them, on-site for the past several weeks, Patrick said, noting that they are still able to take advantage of these resources this week.

Those skills training and outplacement services efforts include the presence of private and public organizations and entities, including Right Management Group (a company that specializes in job recruitment, training and development); the Los Angeles County Economic Development Corporation (a non-profit, public benefit organization that provides job assistance resources); and representatives from the City of Los Angeles, and County, State and Federal support services offices, according to Patrick.

American Apparel’s Los Angeles operations were a source of pride for founder Dov Charney, who was ousted as CEO in 2014, and many of the workers in its factories remained loyal to him throughout the legal and public relations tussles that continued until the company’s second bankruptcy in little over a year.

Paula Schneider, who took over from Charney as CEO but has since departed, was also committed to American Apparel's made-in-USA ethos. Yet, during her tenure, the company reportedly mulled moving some operations to lower-cost textile hubs in Tennessee, North Carolina, or South Carolina. While Broncs is working to preserve many of those jobs, workers at American Apparel’s facilities told Reuters they feared for their prospects.

Gildan is in the process of developing its "go-forward plans for the brand, including decisions regarding manufacturing, distribution and go-to-market strategies," Gildan spokesperson Garry Bell said in an email to Reuters. As with all acquisitions, the next few weeks will be devoted to developing more complete integration plans and as such Gildan will be in a better position to provide more details on its go-forward plans for the brand during its next quarterly conference call, scheduled for Feb. 23, 2017, a Gildan spokesperson said in an email to Retail Dive.