American Apparel now gives shoppers the choice to pay more to buy products that have been made in the USA

American Apparel now gives shoppers the choice to pay more to buy products that have been made in the USA

Gildan Activewear sees a bright future for its newly acquired and just relaunched American Apparel brand – but is giving shoppers the option of deciding whether to pay more to buy products that have been made in the USA.

The Canadian T-shirt and underwear maker bought the LA-based American Apparel brand for US$88m in a bankruptcy auction in January – and has since been building inventory such as T-shirts and other blank screenprint type products to sell to the printwear market.

But it has also been preparing a direct-to-consumer range that will be sold online and includes denim jeans, dresses, swimwear and other styles American Apparel historically sold alongside its colourful T-shirts, sweatshirts and leggings.

In a first glimpse of its new direction on Tuesday (8 August), the new proclaims "We're basics."

But a big difference is that the clothes will no longer be solely made in the US, which had been one of the brand's biggest selling points.

Instead, Gildan is playing up its large-scale, low-cost manufacturing base, which extends from Central America, to the Caribbean Basin, North America, and Bangladesh. "Globally sourced, ethically made, sweatshop free. That's American Apparel," its new website says.

As if to emphasise the point, shoppers are able to choose between eight identical items – including jersey T-shirts, fleece zip hoodies, and three-quarter sleeve T-shirts – made in the United States and the same items made abroad, the only difference being their price.

The pieces in the 'Made in USA Capsule' collection are priced between $4 and $10 more compared with those made at Gildan's offshore factories. The Made-in-USA unisex flex fleece zip hoodie costs $48, whereas its globally-made equivalent is $38; and a fine jersey crewneck T-shirt costs $22 for the Made-in-USA version and $18 for the one sourced abroad.

"Both are sweatshop free. Identical in quality. Ethically made regardless of location. Different in price. You decide," the website says.

Gildan had already confirmed it would work with third-party manufacturers in the US to continue American Apparel's 'Made-in-the-USA' appeal on some of the direct-to-consumer business. But in March it also said it would offer more competitive price points too, to help drive the potential of the brand and support its international growth.

American Apparel will continue to be made in the US

Gildan is also maintaining an office in Los Angeles, California, in a bid to keep the DNA of the brand in LA. And it has retained some of American Apparel's top advertising and marketing executives who are tasked with re-energising the brand with the consumer.

Vertically-integrated low-cost supply chain

But all of American Apparel's core printwear products are being manufactured in Gildan's own facilities, and the Montreal-based company believes its large-scale, vertically-integrated low-cost supply chain from yarn-spinning to garment-making is key to building the brand's future.

"Really what we bought is a brand. We didn't buy any of the manufacturing capacity," chief executive officer Glenn Chamandy said on a call with analysts last week.

"We had virtually $10m of inventory we purchased, but what we've done is we've basically geared up our manufacturing. We created all the tech packs, to patterns, to really drive the brand.

"The way we approached American Apparel was almost like we licensed the product. We started from nothing, and from a ground zero start we have built the production, which we've done successfully."

"So not only do we gear up the product to basically support our screen-print channel, but we also, at the same time, are gearing up to support retail ready product and leveraging the success of our supply chain to service the consumer as well."

He adds: "This infrastructure is allowing us to offer a strong value proposition to our customers and to end-users who benefit from high value, quality products at attractive prices."

Ring spun yarn

In the space of two years, for example, Gildan has gone from a standing start to being one of the largest producers of ring spun yarn in the western hemisphere.

This is in part due to its just-announced $13m acquisition of Swift Spinning, one of its US suppliers producing combed and carded cotton ring spun yarns for socks and knitted apparel in two facilities in Columbus, Georgia.

"If you're not investing capital, you're not able to keep up with the change. So we're the only company that's investing heavily in manufacturing. And as we make these manufacturing investments, we're leveraging them to grow our topline, but really to gain market share in all the categories in which we sell.

"The reason why we bought Swift is because we needed more capacity based on where our sales are going," especially in fashion basics, which include the namesake Gildan brand, as well as Anvil, Comfort Colors and now American Apparel, where "requirements for high-end yarn continue to increase."

Conceding the company now satisfies around 70% of its yarn needs internally, and is "still buying quite a bit of yarn on the outside market," Chamandy adds: "We're investing heavily in ring spun because those yarns aren't available in the outside market at competitive prices or available at all."

The Swift Spinning deal "will help support growth of our fashion basics brands like Anvil, American Apparel and Comfort Colors as requirements for high-end yarn continue to increase.

"We invested $215m in yarn spinning to support this segment...and we're going to use Swift to really to take it to the next level, because in the fashion segment there's not just core yarns, but there's also viscose and rayon and all kinds of other things that we're going to be bringing to market."

The company also emphasises it is re-shaping the way it allocates capital, no longer focusing on building capacity and using price as a weapon to drive market share, but instead being "very tactical of how we fill that capacity up" to increase margins.

Chamandy also says American Apparel "will hopefully be one of the best acquisitions the company has ever made in terms of return on investments. We're very excited about it.

"We have a lot of demand for it. We already have a lot of commitment to expand the brand into 2018. We've put in all the infrastructure and investments to go direct to the consumer."

Last week the company said the acquisition of American Apparel, along with an earlier purchase of T-shirt maker Alstyle Apparel, together added incremental sales of $29m to its printwear business in the second quarter.

For the three months to 2 July, Gildan's net sales were up 3.8% to $715.4m with a 2% year-on-year rise in its printwear unit to $480m and an 8.1% jump in branded apparel to $235.3m. Net income increased 13.7% to US$107.7m.

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