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Profiles

American Garment

By Glen Martin | Jun 28, 2021

Consumer & Lifestyle California

Company Details

Location

Cerritos, California

Founded

1991

Ownership Type

Private

Employees

25 in United States; number varies in Mexico

Products

Apparel for women and men

President and owner David LaDuke navigates a tumultuous global apparel ecosystem with a renewed emphasis on quality and a keen sense for managing materials and fashion trends for a blue-chip client list.

While the design end of the "rag trade" is headquartered in Paris, Milan, and New York, the manufacturing side is largely consigned to Asia, Latin America, and Africa, where labor is cheap and regulations minimal.

This wasn't always the case, of course. The United States was once a global leader in textile and apparel production. But the great mills and manufacturers that supplied the world with fabric and clothes through the 19th and early-to-mid 20th century have closed for the most part, with the work going abroad.

While a rebound has occurred in recent years, it remains modest and spotty. Total U.S. textile manufacturing hit $18.79 billion in 2019, an increase of 23.8 percent from 2009. But apparel remains in the doldrums: clothing manufacturing fell to $9.5 billion in 2019, a 4.4 percent decline from 2009.

The COVID-19 pandemic, predictably, really bollixed up the industry, with textile production crashing more than 21 percent and apparel falling almost 15 percent in the second quarter of 2020 year-over-year. Further, yarn exports fell by 31 percent and fabric exports dropped by 19 percent in the first seven months of 2020 YOY.

Despite these challenges, some American clothing manufacturers have survived by remaining tenacious, innovative, and nimble. American Garment is a case in point. Founded in 1991, the Cerritos, California-based company produces clothing for a long list of top brands including DKNY, Calvin Klein, Kenneth Cole, Todd Oldham, Christian Audigier, Massimo, JLo, Liz Claiborne, Old Navy, Nordstrom, Bloomingdale's, and Macy's.

The company also manufactures apparel under its own labels: Laila Jayde, Ink Love & Peace, and LJ Femme. Laila Jayde is promoted under a casual luxe rubric, while Ink Love & Peace is aimed at the athleisure market, and LJ Femme is a youth to young adult-oriented Los Angeles "street fashion" brand emphasizing both panache and value.

American Garment has been resistant to offshoring -- but that doesn't mean it's impervious to global market forces, says LaDuke.

"When I started, we were all about made in the USA," says LaDuke. "Unfortunately, we got punished from all the offshoring, so we've had to shift some of our production to Mexico and Guatemala. But we continue to produce apparel domestically as well. That's still very important to us. One of our great advantages is that we have the largest piece-dye facilities [where fabric is dyed after knitting] on the West Coast."

LaDuke has managed to stay solvent because he understands that apparel is based on fashion, which is essentially another word for "change." In his 30 plus years in the business, he has developed an almost preternatural sense for nuances and shifts in consumer tastes.

"One thing we saw during COVID is that people are buying fewer clothes," he says. "Working from home, they simply wore the same clothes day after day. And that may well have some long-term consequences. Priorities have shifted. People want a good phone and computer, and they may be harder pressed to meet car payments and the mortgage. So, apparel and fashion probably aren't the priorities they once were."

At the same time, LaDuke says, consumers seem willing to spend more money when they do buy clothes.

"They want higher quality," he notes. "It used to be people wanted to buy lots of clothes, cheap clothes, then toss them after they'd worn them a few times. Not so much now. They want good products and are willing to pay a higher price. They aren't so inclined to go into a store and buy five or 10 tops. Even my 14-year-old daughter appreciates fewer and better clothes. There's also the environmental aspect -- increasingly, people seem conscious about the impacts of consumerism."

That planetary consciousness is also extending to the materials that go into the clothes, LaDuke confirms.

"The whole organic cotton movement has had three or four starts since I've been in this business, and I've tried to do it myself over the past 15 years," he says. "But ultimately, retailers didn't want to pay the increased cost. They talked a great game, but they wanted the same pricing. Right now, it seems that there's increased consumer interest in organic cotton again. But there's only so much organic cotton produced annually, and only so many factories to process it. It's like a hot night club -- everyone is rushing to get in, and there's only so much space. So, we'll see where it goes."

One thing is clear: apparel is going higher -- as in, higher prices. LaDuke observes many government economists are characterizing the recent surge in inflation as a temporary COVID-induced blip. However, he's concerned that it may be a long-term secular change -- and one that will hit textiles and apparel particularly hard.

"We're seeing supply chain shortages, which are driving prices up across the board," he says. "Cotton yarn -- essentially the basis for this industry -- is up to $2.40 a pound from $1.40 last year. There are shortages in spandex. Rayon is 50 percent higher than last year. A lot of people think this is transitory, but I'm not sure it is. Once costs are passed along, it's rare to see prices go back down."

And there are other issues hobbling the garment trade, including a shortage of labor and oceanic shipping costs.

"It has never been particularly easy to find people able and willing to do this work, and it's much harder now," LaDuke says. "And shipping is a major problem. There are only so many containers and so many ships in the world, and they're all in high demand. A container coming from Asia used to cost $3,500 to transport. Now it's $12,000 to $15,000. On top of that, port delays are at an all-time high because everyone is rushing back into trade. And shipments considered important -- say, a load of semiconductors -- are going to be prioritized over t-shirts. And it's getting hard to even find people to load the containers. So, you have delays of weeks or months, further driving up costs."

But passing along costs to the ultimate end point -- the consumer -- is a limited option at best, says LaDuke.

"For many or even most people, there are only so many dollars in the wallet," he observes. "Rents are up 30 percent, home prices are skyrocketing, insurance is jumping. You take out taxes and withholding -- where are you? There's not much left for discretionary purchases."

LaDuke has rolled with the punches from COVID and the aftermath. Tariffs imposed by the Trump administration helped to a degree, and when the pandemic hit, he switched a chunk of his capacity to making masks. That helped tide him over, but now there's a glut of masks from foreign producers. So LaDuke continues to adjust both tactics and strategy, seeking a constantly shifting sweet spot.

"I had some operations in Guatemala, but we've cut back drastically because it entailed container shipping," he says. "Now we're concentrating operations in the U.S. and Mexico because only land transport is involved. We're also putting fewer of our eggs in large baskets. Having a 50,000-unit order is more efficient and profitable than filling five 10,000-unit orders -- but there's also more risk. So, I'm spreading my risks out, concentrating on multiple customers rather than one or two big ones."

LaDuke candidly acknowledges he feels like he's treading water sometimes, but he also emphasizes his company retains one major advantage with consumers: that USA brand.

"People understand that means quality," he says. "They certainly pay lip service to it; they indicate they're willing to pay a little more for it. You just don't want to find yourself in a price war because then you can't compete. No matter what, though, I do know one thing: I'm staying in manufacturing."

Photos courtesy American Garment

Challenges: "Rising costs for everything. That's a huge challenge," LaDuke says. "Yarn, shipping -- also, all the liquidity the Fed keeps pumping into the system isn't helping inflation. It's the classic situation of too much money chasing too few goods. And our labor situation is really worrisome. There seems to be less and less interest in working, particularly where young people are concerned. Maybe it's because so many are living at home with their parents and don't need much money to do what they want. Or it could also be that unemployment benefits have been so generous through COVID that people aren't motivated to find a job. It's a real problem."

Opportunities: "We're putting more emphasis on our private labels and focusing especially on direct-to-the-consumer," LaDuke says. "We're also working to expand our Mexico operations and phase out as much container shipping as possible."

Needs: "I need more sales for a start," LaDuke says. "Even long-term customers have cut back on their orders, and the reasons aren't always clear. We're still having good sell-throughs, but the amount of business I'm getting is less. It could well be that people simply aren't buying as much apparel as they were, and that they're disposing of their income in other areas. We also need qualified labor -- people able and willing to do the work. I used to get 100 resumes when I flew a job. Now I'm lucky to get 20 or 25, and few if any will have the necessary qualifications. And often, when you do arrange an interview --when it's just a matter of them showing up and getting the job -- they'll ghost you. They won't even come to the interview."

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