NEW YORK (TheStreet) -- Beleaguered American Apparel (APP) may end up being owned by a private-equity firm with experience in fixing struggling retailers, but a strong case could be made that ousted founder Dov Charney's creation should be acquired by either Target (TGT) or Macy's (M) .

To light a fire under sluggish U.S. sales, especially in apparel, and expand abroad, Target and Macy's should be considering a bid for American Apparel.

Although not a cultural fit at first blush at each old-school retailer, long tenured executives at both companies could infuse American Apparel with the proper operating discipline that it needs to reach its full financial potential. It also helps that Target and Macy's are cash-rich companies that could easily bid aggressively for American Apparel.

The hypothetical play by either retailer, however, likely wouldn't come without a fight from private-equity shop Irving Place Capital. On Monday, American Apparel's board received a bid, reportedly from the private-equity firm for $1.40 a share, which would value the retailer at about $244 million.

Shares were trading early Tuesday at $1.06 a share.

A source told Reuters on Monday evening that the board thinks that the takeover offer should be "several multiples" higher.

American Apparel also said Sunday that it has adopted a new, one-year "poison pill" takeover defense with a 10% trigger.

Here is why it makes sense for Target or Macy's to offer those "several multiples" and join the bidding and why American Apparel's board should listen.

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Access to New Growth in the United States

Target's same-store sales growth has been painfully weak in the United States during the past three years, in large part because consumers have been putting fewer items into their red and white Target baskets.

Same-store sales for Target U.S. fell 0.4% last year, rose 2.7% in 2012 and gained 3% in 2011. Units per transaction rose 0.7% in 2013, 1% in 2012 and 3.2% in 2011.

So far this year, Target's U.S. same-store sales have risen a meager 0.3%, with units per transactions actually falling 0.8%.

Fewer units in the basket are the consumer's way of saying that Target's discretionary merchandise, such as apparel, isn't differentiated enough relative to competitors.

A lack of differentiation in product is mentioned by Target as one of its top risks in its annual report: "We sell many products under our owned and exclusive brands. These brands are an important part of our business because they differentiate us from other retailers, generally carry higher margins than equivalent national brand products and represent a significant portion of our overall sales."

The lack of differentiation showed up in Target's apparel sales this year, with comparable-store sales characterized by the company as declining by a small amount in the first quarter and comparable-store sales in apparel declining slightly in the second quarter and third quarters.

Target's weak apparel sales this year are a far cry from when consumers were paying full price in the early 2000s to own "cheap chic" threads inspired by celebrity designer Isaac Mizrahi and others.

By acquiring American Apparel, Target would prop up an apparel business that represents some 25% of its annual sales. The opening of American Apparel shops inside Target stores with the low prices for which Target is known would give the company exclusive, differentiated products for millennials and teens not found at J.C. Penney (JCP) , Kohl's (KSS) , (JCP) or Macy's.

Target, which counts China as its biggest sourcing country, would likely have to outsource a portion of American Apparel's U.S.-based manufacturing to get prices down and subsequently tweak the "no sweatshop" marketing for the brand.

Target would further obtain instant access to 240-plus American Apparel stores in the mall, essentially giving it a new distribution channel. Importantly, there are synergies, such as transportation, that could be leveraged from the geographic positioning of the store bases.

Target's biggest U.S. market is California at 262 stores, while American Apparel has 38 stores in the state, for example. Once in malls, Target could entice American Apparel shoppers back into its big-box stores with the 5% rewards program that it offers Target debit or credit cardholders.

As for Macy's, American Apparel would give the department store retailer a sales jolt to an already hot area of the store: apparel for millennials.

"Our strongest businesses in the quarter were handbags, fragrances, active and millennial apparel," Macy's Chief Financial Officer Karen Hoguet said during the Nov. 12 third-quarter earnings call.

On the previous quarter's call, she noted, "We have said all along that investing in this millennial customer was important going forward, and that's part of the reason we feel so good about the future for Macy's."

Macy's has already been undergoing a reinvention of its stores to include new, licensed shops from Build-A-Bear (BBW) , Finish Line (FINL) and Lids (a division of Genesco (GCO) ), setting the precedent for presenting consumers with well-known specialty apparel brands under the Macy's roof.

In fact, Macy's Chairman and Chief Executive Terry Lundgren said in a Dec. 1 interview that smart-watch shops aren't out of the realm of possibility for next year.

An American Apparel acquisition would help counteract slowing same-store sales growth at Macy's.

Same-store sales, including sales from licensed departments, increased 2.8% last year, moderating from increases of 4% and 5.7% in 2012 and 2011, respectively. Same-store sales have increased 0.8% this year.

Interestingly, Macy's would be channeling its heritage of nurturing exclusive brands by gobbling up American Apparel.

Teen apparel retailer Aéropostale (ARO) was established in the early 1980s by Macy's. In 1987, Macy's opened the first Aéropostale standalone store.

While still part of the Macy's/Federated Department Stores brand, Aéropostale expanded to more than 100 stores. Finally, in August 1998 the division was sold to Aéropostale management and Bear Stearns Merchant Banking.

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International Expansion Opportunities

As of Sept. 30, American Apparel operated 245 retail stores in 20 countries. Outside Canada and the United States, the company does business in such key geographic areas as Brazil, China, Japan and the United Kingdom.

American Apparel would give Target and Macy's a platform to expand abroad, counterbalancing both firms' continuing U.S. store closures. Macy's has closed 33 stores since 2011, while Target has shuttered eight stores in the United States this year alone.

Both Target and Macy's have signaled that they understand the importance of taking their brands outside U.S. borders, employing different tactics to make it happen.

Target now has 133 owned and operated stores in Canada, after opening its first location last year. American Apparel has 32 stores in the country and could give Target a brand to expand via in-store shops and stand-alone stores that is somewhat familiar to Canadians.

Macy's, under a license agreement with Al Tayer Group, opened its first Bloomingdale's store in Dubai in 2010. In 2018, the retailer will unveil a 205,000-square-foot Macy's store in Abu Dhabi in concert with Al Tayer Group.

To tap into American Apparel's full potential, and keep costs and operating risks at bay, Target and Macy's could employ a licensing model to scale the brand quickly overseas. Similar licensed models have been used by retailers such as Aéropostale and American Eagle Outfitters (AEO) in Asia and Latin America and Starbucks (SBUX) in the United Kingdom.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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