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Consumer discretionary

Here’s Why Amazon.com, Inc. (AMZN)–American Apparel Deal Could Impress Millennials

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The deal is also likely to please Donald Trump, who is expected to significantly favor US production

Reportedly, Amazon.com, Inc. (NASDAQ:AMZN) showed interest in acquiring bankrupt American Apparel LLC along with Forever 21 – teen apparel store chain. According to Bloomberg, the main question that surfaced was regarding why Amazon would be interested in buying a company that went bankrupt twice and had been losing money for years.

While the company has made no official announcements regarding its interest, analysts believe that a deal is far from being strange and makes sense. Consequently, AMZN shares jumped more than 3% during active trading yesterday.

Bloomberg report also suggested that while the company faced various challenges and uncertainties, it still remains quite popular and strong amongst millennials. The deal makes sense as it can reportedly please fashionistas, who like the company’s urban wear and are more habitual of shopping online. The transaction will also enhance Amazon’s response to new US market trends as American Apparel owns a clothing factory in Los Angeles.

Moreover, apparel constitutes an important part of the retailer’s business. The company has been observed of digging deeper into fashion with its own private label. It has also made various acquisitions within this category, such as Zappos.com for $850 million.

KeyBanc Capital Markets’ managing director, Ed Yruma stated: “Amazon has two key growth pillars for retail growth — apparel and grocery. While I’m not going to handicap the likelihood of this particular rumor, I do think we will see them mentioned more frequently as a buyer of apparel brands.”

Furthermore, the deal is also likely to impress President-elect Donald Trump, who is likely to encourage US production. The company can create more jobs by keeping its factory in the US.

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