American Apparel considers outsourcing overseas

A sign hangs above an American Apparel store in the Wicker Park neighborhood in Chicago, Illinois.

David Brancaccio: American Apparel is famous for making its clothes in America -- downtown L.A. to be more precise. But the company is struggling and in an interview in the Los Angeles Times, American Apparel's CEO says he's getting pressure from other executives and members of the board to make clothes cheaper overseas. Dov Charney says he is still keeping to his vision of Made in America, but he can't rule out imports of "American" apparel.

Dorothy Lakner is a retail analyst at Caris and Company. Ms. Lakner, thanks for joining us.

Lakner: Oh, thanks for having me.

Brancaccio: You keep an eye on another Los Angeles-based retailer, True Religion. They tend to focus on trying to make the stuff in the U.S.?

Lakner: They’re mostly a denim company, but it’s very high end denim. So you’re talking about jeans that sell for $200 to $300 or even more dollars. That makes it relatively easier for them to make their product in the U.S., just given higher labor costs. But it does give them the advantage of saying “our product is made in the U.S.A.,” and two, it gives them much faster turnaround times.

Brancaccio: Part of their brand is wrapped up in this idea that it’s domestically produced?

Lakner: Yes. I mean, all of the imagery is very western U.S., so it definitely helps them I think to make their product here. But there’s also a practical advantage again, and that’s that they can respond fairly quickly to trends that are happening in jeans, and make the product quickly and get it out to their stores.

Brancaccio: You can imagine there would be a penalty, though, if suddenly the news came out that they were going to outsource their stuff.

Lakner: Yes. But you know, keep in mind that most of the industry -- I mean the apparel industry in the U.S. -- product manufacturing went overseas a long time ago and it really hasn’t come back. Even with those labor costs going up, as they’ve gone up in China, I don’t see many of those companies starting to bring back production to the U.S. any time soon.

Brancaccio: Dorothy Lakner, Caris & Company, thank you very much.

Lakner: Thank you.

About the author

David Brancaccio is the host of Marketplace Morning Report. Follow David on Twitter @DavidBrancaccio

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