American Apparel May Move Manufacturing Out Of California

Image courtesy of TheGlassPeople

Part of American Apparel’s identity is tied to the company’s Los Angeles manufacturing facility, but executives for the recently bankrupt clothing company recently floated the idea of outsourcing trickier items to third parties. Now comes news that AA has its eyes on keeping its manufacturing in the states, but in areas where labor costs are lower.

The Los Angeles Times, citing people familiar with the matter, reports that American Apparel could move some processes to states such as Tennessee, North Carolina, or South Carolina, where the minimum wage is lower than L.A.

Starting in 2020, the minimum wage in L.A. is expected to reach $15/hour, while the hourly pay in the three other states is currently $7.25.

American Apparel declined to address the possible move, noting it does “not comment on rumors or speculation.”

Still, sources say the retailer is in the process of shedding some L.A. facilities, setting the stage for a move by next year or 2018.

The L.A. Times reports that the company’s downtown lease doesn’t end until 2019, but sources say the company could retain that building for designers.

Speculation that the retailer would move some of its manufacturing outside of L.A. began this spring, when Chief Executive Paula Schneider sent a letter to employees about layoffs and a “redesign of our production process” that will also include making fewer garments in a year so the company can cut down on inventory that eventually has to be discounted anyway.

She also floated the idea that manufacturing some trickier pieces like jeans and other denim clothing might be outsourced to a third-party company, although those items “will still be American-made.”

The company says only a fraction of garments would be outsourced, the ones that are more complicated and take more labor, but aren’t the big moneymakers. For example, 80% of the garments made by American Apparel in 2015 were things like T-shirts, while 20% were complicated items like denim.

American Apparel is said to be considering moving manufacturing out of California [Los Angeles]