Gildan to keep some American Apparel manufacturing in US
Under Canadian activewear manufacturer and wholesaler Gildan, American Apparel will be propped up as a premium segment that will foster international sales, CFO Rhodri J. Harries said on a conference call with analysts this week, according to a transcript from Seeking Alpha.
Gildan will keep some U.S. manufacturing for American Apparel merchandise, but it will also leverage overseas manufacturing in order to make lower prices possible, Harries said.
Gildan is also running an American Apparel office in Los Angeles, the site of the brand’s former corporate headquarters and once its sole manufacturing base. “A small office in L.A. … will allow us to keep the heritage of the brand alive, at the same time continue to use social media, a platform to drive the image and brand image of the brand,” Harries said.
American Apparel clearly remains a robust brand, considering Gildan believes it will allow an incursion into Europe and elsewhere on the global market.
“We have a huge interest in the American Apparel brand. So that's another big opportunity for us because international growth is growing at obviously a much faster rate than our U.S. market,” Harries said. “[B]asics in Europe are a much smaller percentage of the business. In the U.S., the basics segment was 60% and the fashion was 40%. It's the other way around in Europe. Basics is 40% and fashion is 60%. So that's really why we're so excited about all these fashion brands we're bringing in, because that's going to accelerate our growth in Europe.”
A proposed 20% border adjustment tax could help smooth out those prices to American consumers for any American-made goods, at least to some extent, but there would be no effect on overseas shoppers.
Gildan, however, appears to be leveraging American Apparel’s Los Angeles base and made-in-USA ethos mostly for branding purposes, in contrast to founder Dov Charney’s authentic commitments to those features. Indeed, Charney retains a belief that Los Angeles-based manufacturing is superior to overseas factories and even in many respects to less expensive apparel manufacturing in other areas of the U.S.
It’s not clear that Gildan can pull off selling the American Apparel brand to overseas fans without Charney’s vision, which helped it gain fans in big cities like Tokyo and London. Charney himself is working on a new venture, dubbed "That's Los Angeles," which is also based in L.A. “We’re committed to Los Angeles manufacturing,” Charney told Retail Dive about his new business. “Of course there’s the argument that it’s ethical but I’m telling you that [in the long run] it’s also cheaper” because it allows for a more nimble design-to-manufacturing process.
- Seeking Alpha Earnings Call Transcript Gildan Activewear Q4 2016 Results
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