Amazon eyes American Apparel: The Trump Effect?

Made in America: Amazon is one of a number of companies reportedly considering buying one of the largest garment makers in the US. 

First Look

One of the largest garment makers in the United States is being eyed for purchase by Amazon.com and teen apparel chain Forever 21, as President-elect Donald Trump ramps ups his rhetoric against imported goods.

American Apparel, with manufacturing facilities in southern California, could receive offers from Amazon, Forever 21, Next Level Apparel, and brand licensor Authentic Brands Group before its bankruptcy auction ends Friday, Reuters reported. Any offer would have to match or exceed a $66 million stalking horse bid that Canadian T-shirt and underwear maker Gilden Activewear placed when American Apparel filed for bankruptcy in November.

The clothing manufacturer is popular among young people and sports about 110 storefronts, making it an appealing buy, especially in the wake of announcements from Mr. Trump and his transition team that they may slap tariffs on products American companies import. Trump has also promised to lower taxes and regulations for domestic businesses.

The companies considering buying American Apparel are in talks with the Los Angeles-based clothing maker and its financial advisers. American Apparel filed for its second bankruptcy within a year in November with the intent to sell the company. The outcome of the auction is expected next week.

As its name implies, the company stakes its identity on its “Made in the USA” slogan. When Dov Charney started the company in the 1990s, most garment makers were moving offshore. But Mr. Charney printed “sweatshop-free” and “Made in the USA” on the label, and the brand became a hit among young people.

The company kept its factories in California as it grew, despite the Golden State's high labor costs. Now employing about 3,500 workers, American Apparel is one of the largest garment makers in the US.   

Amazon is mulling purchasing American Apparel as the online retailer builds up its recently launched private label brand. Among the many products it makes itself, Amazon quietly launched its own private label apparel brands, reported fashion industry trade journal Women’s Wear Daily in February. These brands include at least seven names: Franklin & Freeman, Franklin Tailored, James & Erin, Lark & Ro, North Eleven, Scout + Ro, and Society New York.

Forever 21, another possible buyer, is known for its inexpensive teen apparel, with prices kept down in part by lower labor costs abroad.

News of these negotiations comes on the heels of Trump's repeated promises to improve the business environment in the US, combined with threats to punish companies that move jobs offshore or try to import products back into the US.

Trump posted a strongly-worded series of six tweets last month:

“The U.S. is going to substantialy [sic] reduce taxes and regulations on businesses, but any business that leaves our country for another country, fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its products back into the U.S. without retribution or consequences, is WRONG!"

“There will be a tax on our soon to be strong border of 35% for these companies wanting to sell their product, cars, A.C. units, etc., back across the border.”

His transition team has also discussed an executive order to impose a blanket tariff on imports as high as 10 percent, according to CNN. Incoming White House Chief of Staff Reince Priebus floated the idea of a 5-percent tariff among Washington business insiders.

Trump also recently named Robert Lighthizer, an official in the Reagan administration and a harsh critic of China’s trade practices, as his chief trade negotiator. When Trump announced his choice, he said Lighthizer would "fight for good trade deals that put the American worker first."

But some speculate such tough talk is just negotiation talk, as the Christian Science Monitor’s Amanda Hoover reported last month.

This report contains material from Reuters.