Montreal-based activewear brand Gildan has entered into an asset purchase agreement to acquire the worldwide intellectual property rights and certain assets of the American Apparel brand for approximately $66 million in cash.
Also Monday, American Apparel filed for bankruptcy protection under Chapter 11 — its second Chapter 11 filing in a little over a year. The retailer emerged from bankruptcy as a private company this past February.
Gildan will separately purchase inventory from American Apparel in the printwear channel, but will not buy any of its stores.
Gildan’s acquisition of American Apparel’s essential assets is expected to conclude in the first quarter of 2017, subject to the activewear retailer being selected as the successful bidder in any bankruptcy auction and the bankruptcy court’s approval, Gildan said Monday. Gildan will be entitled to a break-up fee and certain expense reimbursements if it does not prevail as the successful bidder, the company added.
While American Apparel has retained enough brand appeal to be an attractive takeover target for a company like Gildan, it failed to reclaim its place as a favored destination for edgy apparel or to beat back the financial pressures it faced as it bled cash for the last few years, struggling to command premium prices as lower-quality, lower-priced fast fashion rivals took market share and fickle shoppers strayed.
American Apparel simply failed to “get its act together” after going private, according to Neil Saunders, CEO of retail research agency and consulting firm Conlumino, who also suggested that the company was biding its time to sell itself rather than devote any real effort to turning itself around.
“In our view this comes down to a lack of leadership,” Saunders wrote in an email to Retail Dive. “On the management front the company seems to have stumbled from one crisis to the next with the resignation of Paula Schneider as CEO leaving it rudderless at a time when it most needed direction. While the bondholders which took control deserve credit for rescuing the company, their intention appears to have been for American Apparel to tread water while they searched for a buyer. In a market as fast paced as fashion this was always a risky option for a business that actually needed a long term turnaround plan.”
The Gildan deal will almost surely result in the retailer’s closure of all American Apparel stores in the U.S. Last week American Apparel abandoned its U.K. stores, leaving them with just enough inventory to make it through the holiday season.
Gildan’s decision to opt against taking over American Apparel's stores is a sign of how low the brand has sunk, Saunders added. “This disappearance of the American Apparel brand from malls and from Main Street represents the end of a turbulent period for a once controversial and iconic, but now just troubled, brand,” he said.