Amazon, Forever 21 vying for bankrupt American Apparel

Online retailer and teen apparel store chain Forever 21 are among the companies weighing offers to acquire bankrupt American Apparel, people familiar with the talks said on Wednesday.

The bankruptcy auction of Los Angeles-based American Apparel, which made its branding theme "Made in the USA," will determine the future of a major clothing manufacturing plant in California, one of the most expensive US states in terms of labour costs.

Keeping jobs in the United States has become a hot button political issue since the presidential election.

Ford on Tuesday reversed plans for a $1.6 billion factory in Mexico and said it would add 700 jobs in Michigan after receiving criticism from President-elect Donald Trump.

Amazon and Forever 21, as well as California-based apparel maker Next Level Apparel and brand licensor Authentic Brands Group, are in talks with American Apparel and its financial advisers about submitting offers ahead of a deadline on Friday, the people said.

Any successful offer would have to top a $66 million stalking horse bid by Canadian apparel maker Gildan Activewear, which American Apparel agreed to when it filed for bankruptcy in November.

Gildan's offer included an option to keep American Apparel's manufacturing plants in southern California, which employ about 3,500 workers, making American Apparel one of the biggest garment makers in the United States.

Read also: Amazon 'to enter S-E Asia through Singapore'

But Gildan plans to preserve only some of the California production should its bid prevail, the sources said. Many of Gildan's production facilities are in low-cost countries.

An outcome in the auction is expected next week, the sources said, asking not to be identified because the deliberations are confidential.

American Apparel declined to comment. Amazon, Forever 21, Next Level Apparel and Authentic Brands did not respond to requests for comment.

A Gildan spokesman said in an email on Wednesday that it is putting together all the necessary information from its due diligence to best position itself in the auction.

Amazon's acquisition of American Apparel would be a major push for the e-commerce company into branded fashion and apparel.

The Seattle-based company began to launch private label brands last year.

Forever 21, founded by Korean-American Do Won Chang, is known for its low retail prices, helped by lower labour costs abroad.

American Apparel's first bankruptcy in 2015 was due in part to its relatively high labour costs.

Read also: From serving coffee to becoming Forever 21 billionaires

Amazon move here will put pressure on local retailers