Executives at American Apparel have recently filed for chapter 11 bankruptcy protection for the second time in 13 months.  The bankruptcy of American Apparel rounds off a tough year for the fashion industry, from the effect of Brexit to the closure of various stores, such as Banana Republic in the UK.  It seems that American Apparel, with its minimalist design, has also had trouble charming a more fashion-conscious public, even with its “made in the USA” tag line.

Potential respite comes from Canadian active wear manufacturer Gildan who have announced a $66 million bid for the US brand. However, Gildan’s bid is initially only for the American Apparel IP and “certain assets”. Manufacturing and distribution operations may be included in the purchase but the 110 retail outlets may be put up to auction. A letter from its administrators, also confirms that American Apparel’s UK and European stores will be closed.

Gildan’s decision not to purchase the 110 American Apparel retail outlets is a further indication of the uncertain future of traditional “bricks and mortar commerce”. Unless a purchaser appears, American Apparel may see its outlets sold to the highest bidder at auction, in order to satisfy its creditors.

Manchester, UK - April 23, 2013: American Apparel fashion store on April 23, 2013 in Manchester, UK. American Apparel was founded in 1989 and has 273 store locations as of 2013.

So, how might Gildan seek to gain from the purchase of the American Apparel IP? Whilst the details of the transaction are unknown, the purchase of the brand may include valuable assets, such as the designs of all clothes and accessories made to date (whether in production or not).

Included in American Apparel’s IP may also be a valuable selection of consumer and business data. Data on the purchasing habits of young millennial fashionistas will likely fetch a high price if sold to third parties. If bought, Gildan may be able to use American Apparel’s consumer data to develop and advance its own commercial strategy, newly equipped with the American Apparel brand.

Gildan may therefore turn American Apparel into an online only brand, allowing it to capitalise on the best of the brand without the costs of running the physical stores. American Apparel has also traditionally been a brand for the younger consumer, who, being more technologically savvy, may not miss the personal touch of interacting with store assistants.

With 2017 round the corner, Fashionista will be keen to see how the American Apparel story develops and whether the New Year will see a reversal in the fortunes of the fashion industry.

By: Timothy Watkins
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