American Apparel, which is still in lots of debt and hasn't turned a profit in four years, just purchased Oak, a hip, independent New York-based specialty retailer with two stores in NYC and an e-commerce site.
“I’m excited by this because I saw an opportunity to build Oak without a lot of extra costs. They can leverage our manufacturing capabilities, our POS [point-of-sale] and RFID [radio frequency identification] systems, our warehousing and our freight and distribution,” Dov Charney explained to WWD.
Oak's always had a cult customer base and its growth has been a bit inconsistent--it's opened and closed stores in Park Slope and Fire Island, and launched and then got rid of a lower priced line. However, wholesale of its in-house line has done well--it's sold through Net-a-porter, Saks Fifth Avenue and Selfridges, among others.
According to the trade, Oak will operate as a separate division under American Apparel and its founders Louis Terline and Jeff Madalena will remain at the helm. As for how much the two brands will influence each other, Terline and Madalena will reportedly "provide advice" on American Apparel product.
Oak's sales are apparently in the neighborhood of $5 million--Charney says he believed he can grow that number exponentially. He also plans to add more locations, including ones in Los Angeles and Seoul, where the retailer's cool, under-the-radar, directional brands would likely do well.
According to Terline, the three have been in talks for the past year and half. And apparently it didn't cost American Apparel that much, as the transaction was reportedly small enough that they didn't have to disclose it to the Securities and Exchange Commission.
Could Oak be what American Apparel needs to get back in shape? Perhaps a successful new brand will be attractive to investors? Let's hope so--they seem to be on the right track lately.