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American Apparel sold to Canadian firm just as 'Made in USA' grabs the spotlight

Shan Li, Los Angeles Times on

Published in Business News

LOS ANGELES -- With edgy marketing, an audacious founder and quality clothing sewn in Los Angeles, American Apparel was held up as a rare success story in U.S. manufacturing at a time when many in the garment industry were racing overseas.

But after years of turmoil, American Apparel is selling its brand in a bankruptcy auction to Canada's Gildan Activewear -- ending its 20-year-run as one of the country's biggest garment makers and the employer of about 3,500 factory workers in Southern California.

Gildan agreed to pay $88 million to buy the brand and some manufacturing equipment. The company had no interest in American Apparel's 110 U.S. stores, and opted not to assume leases on its distribution center and production facilities in the LA area, Gildan spokesman Garry Bell said.

"This was always about buying assets out of bankruptcy," Bell said. "The reality is this wasn't a purchase of an ongoing concern."

American Apparel bucked fashion industry trends when founder Dov Charney opted to manufacture most of the firm's cotton basics in Los Angeles.

The company's colorful garments and provocative advertising caught on with young fashionistas. Charney was also a vocal supporter of immigration reform and worker rights, touted the company's "Made in USA -- Sweatshop Free" motto on billboards and print ads throughout the country.

But the company has faltered in recent years. Troubles started after American Apparel began taking on massive debts to fuel its store expansion; at its height, the company had about 230 stores worldwide -- many of them underperforming.

The board in 2014 voted to oust Charney as chief executive and chairman, citing allegations of sexual misconduct with employees and misuse of company funds. That set off more than two years of turmoil that tainted its brand and distracted its management from turning around the business.

Despite filing for bankruptcy for the first time in 2015, American Apparel failed to shed enough stores, which continued to be a financial drag on the company, analysts said. The board also failed to make drastic changes, such as moving more manufacturing offshore, as Charney continued to fight his ouster both in the courts and in public.

"This company has been a dead man walking for over two years," said Craig Johnson, president of research firm Customer Growth Partners. It's "a casualty of gross mismanagement at the top and missing-in-action board governance."

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