Retail odd couple in potential tie-up
Gildan is defying its image with American Apparel bid
Gildan Activewear Inc. is spicing up its image with a bid for American Apparel Inc., the racy and embattled purveyor of jerseys and tights.
If the tie-up succeeds, they’d be fashion’s new odd couple.
How odd? For an answer, look no further than the companies’ advertising strategies. American Apparel, which filed for bankruptcy protection this month, is known for crude and lewd ads featuring scantily clad teens and, more recently, for taking a stand on controversial social issues such as same-sex marriage.
Compare that to Gildan’s latest campaign, in which the Canadian company’s pitchman derides the use of half-naked models to sell garments not meant to be seen in public. “I’m Blake Shelton,” the country music and TV star says, “and I’m modelling underwear.” He’s fully dressed during the entire 30-second spot.
Montreal-based Gildan’s $66-million (U.S.) offer is the only binding bid for American Apparel, which includes the brand and none of its retail outlets.
Gildan spokesperson Garry Bell said the bid also includes American Apparel’s manufacturing assets, but that the company can withdraw any of them upon review.
Although there are obvious synergies between the two companies — both are players in the $4.5-billion U.S. screen-printing industry and socalled “basic looks” are staples in their clothing lines — how to merge the opposing corporate images will pose a major challenge.
“It’s very hard to take on a brand that stood for something so outrageous,” said Allen Adamson, the New York-based founder of consulting company BrandSimple and former North American chairperson of branding firm Landor. “Once you dial it down, you’re often left with nothing.”
There’s a “natural alignment” on the screen-printing side, Bell said, but it’s too early to discuss plans for American Apparel-branded products. The screen-printing unit, which competes with Hanesbrands and Fruit of the Loom and sells blank T-shirts and other items to wholesalers to customize, accounted for 60 per cent of Gildan’s $2.6 billion in revenue in 2015. The acquisition may help the 30-year-old company, which has expanded into branded apparel and produces New Balance Athletic Shoe and Under Armour socks for retail stores, grow in the more fashionable and lucrative end of screen-printing.
“This is going to accelerate their growth strategy in the fashion basic segment,” said Montreal-based Susan Da Sie, who helps manage $343 billion globally at Manulife Asset Management, which owns shares in Gildan. “The strategy of Gildan is to build low-cost capacity and sell more units, so this will fit nicely into their manufacturing footprint.”
Gildan’s shares have climbed about 9 per cent since Nov. 11, the final trading day before its bid for the assets was made public. That compares with a 13-per-cent drop in 2016 before the disclosure.
Los Angeles-based American Apparel will keep trying to attract a better offer from a buyer willing to take on all of its assets, including its 110 U.S. locations.