Former L.A. Hipster Magnet American Apparel Is Back With a Store

(Bloomberg) -- American Apparel is returning to the physical realm.

The iconic Los Angeles-based brand is preparing to open a flagship store in its home city later this year, its first foray back into brick-and-mortar shops after all its locations closed following a bankruptcy process. New owner Gildan Activewear Inc., the Montreal-based company that bought American Apparel but not the physical stores in an auction last year, said the new location will complement e-commerce operations and serve as an incubator to gauge trends.

“We're opening one and that's going to be like a test model store for us, and then we're going to see where that takes us in the future,” Gildan Chief Executive Officer Glenn Chamandy said in an interview in Montreal Thursday. “We either could franchise, we could open a couple more, we haven't decided yet.”

The new store will open in the fourth quarter at a defunct American Apparel location on Melrose Avenue that was once the biggest in California. It will be slightly smaller and allow customers “to take part in the full American Apparel experience beyond just buying products,” Gildan spokesman Garry Bell said in an email.

Takeover Plan

Since purchasing American Apparel for $88 million, Gildan integrated the brand into its own low-cost manufacturing chain and focused at first on selling blank T-shirts and other items to wholesalers, which customize them for sports teams or events.

It then relaunched the brand's U.S. website in August and expanded online sales to 200 countries last month. Physical stores closed after last year's bankruptcy and were left out of the deal with Gildan.

While American Apparel touted that all of its clothes were produced in the U.S. before the bankruptcy, most items are now made at either Gildan's factories in Central America or sub-contracted elsewhere. The website also offers a handful of U.S.-made items to customers partial to the brand's domestic-manufacturing roots -- which look the same but cost more. The initiative hasn't gained much traction, according to Chamandy.

“The truth is that most people are gravitating to the better value,” he said.

In its heyday, American Apparel ran 280 stores and five factories that powered sales of more than $600 million. Gildan, which reported $2.8 billion in sales last year, expects to make $100 million from the brand in 2018. American Apparel also has given Gildan a foothold in the lucrative niche of fashionable basics.

Gildan's main line of business is clothing such as T-shirts, underwear and socks. It competes with Hanesbrands Inc. and Berkshire Hathaway Inc.'s Fruit of the Loom.

The company's shares rose as much as 5.7 percent to C$39.38 on Thursday, the most in a year, despite missing analysts' first-quarter earnings forecast. Investors expect growth to accelerate in the second half. The company is merging different business units and bolstering distribution to strengthen its e-commerce business.

To contact the reporter on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net.

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Jonathan Roeder, Anne Riley Moffat

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