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Analysis: A Good Fit? Canadian Firm Acquires American Apparel


It’s been quite a tumultuous few years for American Apparel. Between its signature oversexed ad campaigns, founder and former CEO Dov Charney’s fall from grace, and ongoing financial trouble, there’s no shortage of controversy surrounding the apparel company. Most recently, American Apparel filed for bankruptcy for the second time in 13 months amid a $66 million acquisition by Montreal-based Gildan Activewear Inc.

Much like American Apparel, Gildan is known for its basic (albeit considerably less sexy) wardrobe staples, so the acquisition makes sense from that perspective, but that’s where the similarities between the two companies begin and end.

So, what’s in it for Gildan?

A diversified portfolio

Of course, as with many acquisitions, this is a great way for Gildan to diversify their product portfolio. The company, who reported $1.95 billion in revenue last year, recently acquired Peds Legwear, and in addition to making socks for Under Armour and New Balance, owns many other “foot apparel” manufacturers including Gold Toe, and Silks.

Adding American Apparel to the mix not only means being able to sell more than just socks, but ups Gildan’s trend factor by several notches. Moreover, while Gildan will not be purchasing any of the company’s retail store assets, consumers will be happy to know that a major component of the acquisition deal is to retain American Apparel’s USA-made promise by keeping the manufacturing of its goods in the Los Angeles area.

A broader audience

Despite American Apparel’s struggling sales, the acquisition of such a highly recognized brand will open up Gildan’s access to a much younger (and larger) demographic than they have previously known. From medically-enhanced socks to itty bitty bikinis, Gildan’s consumer base now spans across every generation.

As noted in Gildan’s release, "The acquisition will create revenue growth opportunities by leveraging Gildan's extensive distribution network in North American and international printwear markets to further increase the brand's penetration in the faster growing fashion basics segments of these markets."

The next step

As part of its Chapter 11 protection agreement, American Apparel may be required to auction off their assets and business. As such, any number of companies could potentially step forward, effectively outbidding Gildan for the company’s acquisition. Gildan is aware of this and are confident they’ll come out as the successful bidder.

It’ll be interesting to see how Gildan takes a brand with such a storied past, and incorporates it into their more conservative portfolio. While American Apparel has seen better days in many respects, this is still a great opportunity for Gildan to become a stronger, more well-rounded company, with the potential to take over the basics sector in its entirety. As its assortment continues to grow to include more brands within this category, consumers may even expect to see Gildan brands (including American Apparel) popping up in their favorite retail stores, as their distribution undoubtedly grows.

Will they strip American Apparel of their notorious edge or will American Apparel continue doing what they’ve always done best, but under the watchful eye of a well-established conglomerate? Only time will tell.

Dayana Cadet is content marketer for Hubba Inc., a B2B product sharing and discovery platform designed for brands to share rich content with their retail and e-commerce partners, allowing product information to be accurate across all platforms.

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