After seeing a posting online comparing Gap’s “Born to Fit” jean campaign and American Apparels simple advertising look, I realized how competitive these two clothing retailers are. Both companies have the core business of offering comfortable and basic clothing styles at a middle-range price. I began to wonder, what if Gap acquired American Apparel and kept the brand distinct? After all, Gap is struggling to maintain its current retail stores and looking at cutting back the number of locations. Profitable real-estate is competitive and American Apparel’s locations world-wide could give the company something to work with. As of January 2010, Gap had $2.6 billion in cash and American Apparel’s current market cap is just above $90 million. Just glancing at the financials, it seems like an easy buy. However it wouldn’t work.
Despite a common element of selling traditional American style clothing, the companies are far too different. Gap, the classier of the two, already has five brands to manage. Adding a sixth brand with a radically different image and set of business values would cause major issues. Some quick research also revealed American Apparel was bought by Endeavor Acquisition Corp in 2007. Google results offer no information about this company other than this single transaction. It would probably best to allow American Apparel and its creditors to struggle than to get involved with a company facing SEC investigations and questionable business operations.
I wish Gap the best in developing a strong winter campaign to follow its 2009 holiday cheer. And stick with the classic logo for now. As for American Apparel, they should get it together and figure out what business they are in and how to manage it.
*Note: I have never read anything suggesting these companies should join together. These were simply my quick thoughts after considering their products and marketing looks. The companies obviously have different images and values and my 30 minutes of research shows what a train-wreck this idea would probably become. If you have thoughts or reactions, feel free to leave a comment.