American Apparel may move its Los Angeles-based manufacturing facility to avoid California’s minimum wage hike in 2020.
According to a source, American Apparel is allegedly exploring business opportunities in other states, including North Carolina, South Carolina and Tennessee, where the minimum hourly wage remains $7.25, The Los Angeles Times reported. Should American Apparel stay at its current location, it could face further financial hardship once the state’s minimum wage goes up to $15 an hour in four years.
American Apparel said in a statement that it “does not comment on rumors or speculation.”
The lease on American Apparel’s current headquarters is reportedly up in 2019, but another source told the Times that the company will keep its design team and head office in LA.
But following bankruptcy recovery, the public ousting of its CEO Dov Charney and poor performance, American Apparel is trimming its LA facilities. While both sources said the company could be preparing to relocate its manufacturing operations, it’s closing at least one of its factories this fall.
According to a letter sent to employees at a factory that handles knits, “The company will be implementing a reduction in force and plans on terminating the employment of those employees at that location on October 11, 2016.” Sources also said that denim operations have ceased at American Apparel’s South Gate factory and that the company has sold some garment equipment as well.