Skip to main content

American Apparel May Not Survive Next 12 Months

It’s not a good sign when a publicly traded company can’t release its official second-quarter earnings on time because of the expense involved in doing so. It’s even less encouraging when said company announces that it “does not currently expect” to have enough cash to see it through the year.

The future looks anything but bright for American Apparel, which noted in a Securities and Exchange Commission (SEC) filing Tuesday that it may not be able to raise the capital it requires for the next 12 months and that investors could suffer substantial or total losses.

Besides being plagued by lawsuits since last year’s alleged “wrongful termination” of founder and CEO Dov Charney, the struggling Los Angeles-based clothier’s sales have continued to slide. Preliminary figures in the SEC filing revealed that net sales for the three months ended June 30 slipped 17 percent to $134 million, down $28 million from the same period in 2014. Net loss for the quarter was estimated at $19 million, compared with $16 million a year ago.

In addition to a turnaround plan outlined in June that includes cutting $30 million in costs by closing under-performing stores and eliminating jobs, American Apparel is in talks with Capital One Business Credit Corp. regarding waivers for certain minimum financial ratios contained in its asset-backed credit facility with the lender. Standard General intends to purchase all of Capital One’s loans, the filing said, noting that failure to obtain such waivers could have an “adverse effect” on the company’s financial condition.

American Apparel’s market value has plummeted from $540 million to about $90 million in the last five years. The retailer’s stock closed Tuesday at 20 cents.