After a turbulent couple of years that saw the ouster of founder Dov Charney, bankruptcy filings, multiple store closures, and at least 500 layoffs, American Apparel may start outsourcing the production of some of its clothing to other parts of the United States, according to a report from the Los Angeles Times. In a letter to employees last week, CEO Paula Schneider blamed workforce cuts on a “redesign of our production process” that will include making fewer garments throughout the year to reduce overstock. Although the embattled retailer currently operates the largest apparel-manufacturing facility in North America, Schneider also hinted that a third-party company could take on the production of “more complicated” garments, such as denim, but “if we do decide to produce some pieces out-of-house they will still be American-made.”
An analyst from investment banking firm Greif & Co. told the Times, however, that American Apparel may be inching away from its homegrown ethos.
“They’re headed out of Dodge,” Lloyd Greif said. “They are going to outsource all garments. It’s only a matter of time.”
American Apparel may even end up shifting a portion of its manufacturing overseas, Greif speculated.
“They might be kind of testing the waters to see what the market reaction is,” he said. “There’s no reason why American Apparel has to be made in America. It can be designed in America, but cut and stitched somewhere else.”
But Charney says that outsourcing would go against everything the company stands for. “They are doing exactly what American Apparel fought against,” he told the Times, adding that he had always resisted “outsourcing and searching for ways to pay people less money.”
Two years after he was fired amid allegations of sexual misconduct, Charney says he’s looking to start a wholesale clothing business, made up of former American Apparel executives and workers, in South Central Los Angeles.
“We could be six weeks away from making ourselves available to wholesale customers,” Charney told the New York Post.
Charney says that while a so-called “living wage” will be one of the tentpoles of his new operation, staying competitive in an industry dominated by cheap, overseas-made clothing will prove challenging.
“We’ll be focused on equipment and technology that is highly automated because we want to be competitive without resorting to low wages,” he added.