Canadian apparel maker Gildan Activewear has bought US fashion retailer American Apparel in an auction. Gildan will not take control of any of American Apparel's 110 stores but will own the brand and assume ownership of some of American Apparel’s manufacturing plants in southern California, one of the largest garment-making operations in the United States, with about 3,500 employees.
Gildan makes most of its garments offshore, with close to 90 per cent of its 42,000 employees in low-cost Caribbean and Central American countries. It has yarn spinning and distribution centers in cheaper parts of the United States, including North Carolina and Georgia.
American Apparel filed for bankruptcy after the failure of a turnaround plan implemented by its owners, a group of former bondholders. The company's finances deteriorated and sales declined. The iconic company was founded in 1998 and grew to become a part of US popular culture thanks to its racy advertising.
American Apparel’s struggles show the major challenges facing brick-and-mortar retailers as more consumers shop online. Several US retailers, including Aeropostale and Pacific Sunwear, have filed for bankruptcy in recent months. The spending habits of young people have shifted and they visit malls less often and are increasingly going online.