American Apparel, which last month filed for Chapter 11 bankruptcy protection for the second time in a little over a year, has notified some 3,500 Los Angeles-area factory workers that they may be laid off Jan. 6, the Los Angeles Times reports.
American Apparel sent the notices to employees in Garden Grove, South Gate and its Los Angeles headquarters, according to the California Employment Development Department’s “warn report.”
The EDD office lists the factories as possible “permanent closures,” with American Apparel (which has already laid off at least 500 staffers this year) stating the letters are "purely a legal precaution and layoffs are not certain."
While Canadian T-shirt company Gildan (which has offered $66 million for the company) maintains that American Apparel production could remain in the U.S., it is likely to move to North Carolina, according to the Winston-Salem Journal. Some production could migrate overseas, where Gildan already has factories.
The closure of American Apparel’s Southern California factories would herald the end of the retailer’s signature Los Angles-centric focus and represent a blow to apparel manufacturing in the region. Even before its bankruptcy, the retailer was reportedly contemplating a move to the southeast to escape California’s higher production costs.
There are no guarantees Gildan will be calling the shots, however. The scheduled bankruptcy auction for American Apparel’s intellectual property and other assets has also been moved to Jan. 12 from Dec. 21 at the behest of unsecured creditors, who want more time for another party to outbid Gildan’s offer. Judge Brendan Shannon approved the request Friday.
Whether or not production remains in the U.S., American Apparel stores are likely to shutter once its second bankruptcy is complete. The retailer is already winding down its U.K. operations, with executives from accounting giant KPMG appointed as administrators of its 13 British locations. American Apparel has stopped shipments to the U.K., though those stores have enough inventory to get through the holidays.
Former American Apparel CEO Paula Schneider — who had been tasked with revamping its struggling business after the bruising ouster of founder Dov Charney — stepped down in September amid reports the retailer might move some of its operations overseas, and subsequently joined Delta Galil as CEO of its new DG Premium Brands unit.