American Apparel Bankruptcy Appears Likely

NEW YORK — Troubled clothing chain American Apparel Inc. said Tuesday it might not have enough liquidity to sustain itself over the next year.

The news pushed shares down nearly 30 percent to a fresh low.

The company also reported Tuesday a preliminary second-quarter loss. It expressed doubt about its ability to continue as a "going concern," standard language foreshadowing a possible bankruptcy.

American Apparel also said it might fall out of compliance with a credit agreement by Sept. 30. It is working with a lender to amend the agreement, but cautioned that without a reprieve, there may be a damaging financial chain reaction that could force the company to pay both credit lines immediately.

Known as much for its racy ads and outre behavior of CEO Dov Charney as its inexpensive leggings and T-shirts, American Apparel has expanded rapidly since going public in 2007 and operates about 260 stores in 19 countries.

For the quarter ended June 30, American Apparel expects a loss of $5 million to $7 million, compared with a loss of $7.3 million in the second quarter.

It expects revenue to fall to $132 million to $134 million, from $136.1 million last year.

Revenue in stores open at least one year fell 16 percent during the quarter.

In a filing with the Securities and Exchange Commission, the company said it expects losses from operations to continue through at least the third quarter.

American Apparel's auditor Deloitte & Touche resigned earlier this month and American Apparel hired back Marcum, its former auditor. American Apparel said its auditor needs more time to file its second-quarter results with the SEC and will file them "as soon as practicable," no later than Sept. 15.

Deloitte is reviewing earlier financial results to see if they may need to be restated.

Additionally, American Apparel, which is based in Los Angeles, also filed its first-quarter results with the Securities and Exchange Commission. Those earnings had been delayed and if they weren't filed by Monday, the company could have faced delisting.

For the quarter ended March 31, net loss totaled $42.8 million, or 60 cents per share, from $10.6 million, or 15 cents per share last year.

Revenue rose 7 percent to $121.8 million.

Shares fell 36 cents, or 25.9 percent, to close at $1.03 Tuesday, earlier trading at a new low of 98 cents.

The stock had traded between $1.14 and $3.95 during the past year.

Comments

[maxwelllaw]

08:15 PM on 09/01/2010

Concord NC Attorney: More and more businesses are filing for bankruptcy­.

[Balzac]

12:13 PM on 08/29/2010

Apparently the new laws against immigrants have impacted American Apparel. The company was paying them wages commensura­te with normal citizens, but these workers got ICED.

[Balzac]

12:09 PM on 08/29/2010

I think American Apparel is a good company. I love the ads. I can almost smell the scent of a woman when I look at the advertisem­ents.

[ThomasPaine1776]

04:01 AM on 08/19/2010

Tariff imports. Protect American jobs. We USED to do it, until stupid "Free Trade" came along and ruined America.

A tariff is a TAX, basically, on CHINESE IMPORTS and VIETNAMESE imports and anything else we want it to be. We CAN NOT COMPETE with Communist slaves.

[blastocyst]

06:05 AM on 10/06/2010

Hear, hear, Thomas.

[Pilatunes]

11:41 AM on 10/06/2010

An illustrati­ve example of how bad the disparity is. A year or two ago, my mother in law moved into a new home. She always enjoyed having birds around, and had brought her feeders with her. I thought she might also want a nice bird house. While travelling through a small, rural town I stopped in one store and found a suitable house. It looked cute, and it was reasonably priced. I flipped it over (I always do) and there it was 'Made in China'. If it somehow makes economic sense to build a birdhouse in China, ship it to Seattle, truck it to a distributi­on centre, and then ship it to the retailer instead of building it locally and sending it directly to the retailer, I think we are pretty much doomed.

[MehraBee]

03:36 PM on 08/18/2010

I agree that they limited themselves in their branding; American Apparel was very prominent in the "hipster" and music scene, but really nowhere else. When shopping for the workplace, the thought of American Apparel never crossed my mind until a salesperso­n at Express told me to try them on my hunt for a high waisted pencil skirt during summer when NO other stores had them. Low and behold....­! Though I had to go to a store, because their website is kind of a mess.

American Apparel, for the most part, is solid colored basics, with some other really strange stuff tossed in (honestly, where/how do I wear a lace unitard?!)­. But I think it's natural to miss that point when some of their ads look like polaroids stolen from rapist's basement. In the music scene, it was exciting to have merch printed on American Apparel, because you knew you were getting a high quality product. But with higher ticket prices, due to groups such as Ticketmast­er and LiveNation taking over more venues/tou­rs, and the economy in bad shape (for the consumers and the bands), the extra cash to print on AA, or to buy AA is dying out as an option and as a priority.

Kind of strange that AA missed all the signs of changing times/dyin­g trends. And yes I used this as an opportunit­y to bash Ticketmast­er.

[Alexandria Bayee]

02:20 AM on 08/19/2010

Your comment made me laugh pretty good. Especially the first two sentences of the 2nd paragraph!­!!! I totally agree with you.

[John Jay Myers]

12:39 AM on 08/23/2010

"But I think it's natural to miss that point when some of their ads look like polaroids stolen from rapist's basement" ....hilari­ous.

I own a Tee shirt printing compay in Dallas, I can't even show their catalog to some of our customers. (Not that I mind) but many of the churches that order 100's of shirts, don't want to see that.

They have so many flaws with how they do business, I really don't know where to start.
I can't get any type of discount even as a recurring wholesale customer on smaller orders (like 20 shirts) so I am constantly talking customers out of ordering them.

Also as you mentioned.­. who is going to where half the stuff in the catalog, I think the owner may be a fetish guy.

[flamflurm]

02:54 PM on 08/18/2010

Their ads were good.

[guerline04]

03:05 PM on 08/18/2010

I hope they don't. I liked their ads too.

[LegalMomma]

02:16 PM on 08/18/2010

Okay, I only buy clothes online and usually from the clearance section of wherever I am shopping but I seriously have never heard of this company except that I couldn't help noticing their extremely distastefu­l ads on this site. It's an understate­ment to say I won't miss them.

[guerline04]

03:06 PM on 08/18/2010

You;re probably not their target consumer

[guerline04]

03:19 PM on 08/18/2010

You are probably not their target shopper

[mooklyn]

02:16 PM on 08/18/2010

They made some bad decisions, and rode on their own hype within a vocal but limited market demographi­c, I had thought they over expanded as I saw them in too many places in recent years. Should have had a stronger online sales unit and looked to partnering with a big box store for distributi­on and relied on their "Made in America" cred. That's what got them there in the first place. Instead they built too many stores in high priced retail properties­, made too many smutty ads that turned off mainstream consumers, and marketed themselves almost exclusivel­y as a chic brand for hipsters, who are fickle, cheap, and cash poor.

[Nicholasfia]

01:47 PM on 08/18/2010

I think we all agree that we would love to buy a mad in America tshirt.
But, the way the economic situation is currently, most won't or can't spend $20 on a plain t-shirt.
And for those arguing that the shirts are the BEST, they better be at that price point, while be made in america.

[Culturegeek]

03:34 PM on 08/18/2010

The economic situation is the way it is because people can't be bothered to buy American.

[humuhumunukunukuapuaa]

01:42 PM on 08/18/2010

OT: Photo of the model taken at Lanikai Beach on Oahu, Hawaii. I immediatel­y recognized the island on the background as one of the Mokolua islands. :-)

[Kathryn Schorr]

01:12 PM on 08/18/2010

I for one am relieved I don't have to stare at those AA ads anymore. Runaway sex slaves with a pouty stockholm syndrome look in their eyes wearing ugly clothes is not what I want to staring at me while waiting at a stop light. Creepy company.

[ph7]

12:55 PM on 08/18/2010

Overpriced­? American Apparel manufactur­es ALL of its clothing in the United States (hence the name) and pays every worker a living wage. The Gap may be cheaper, but you would be supporting a company that is routinely caught employing child labor in its factories in China, and having employees work in sweat shop environmen­t. Enjoy the $5 you save on that t-shirt!

[easarsfield]

01:07 PM on 08/18/2010

Made in America, yes.
Made by illegal aliens, yes.

[zkelly]

01:39 PM on 08/18/2010

and buying clothes from china is better?

[humuhumunukunukuapuaa]

01:43 PM on 08/18/2010

Made by cheap labor in China and sold by Wal-Mart..­. better?

[hellotiki]

12:49 PM on 08/18/2010

Hey! That's one of the Mokulua Island's of Lanikai in the photo! That place rocks. And who cares about American Apparel? They won't be missed.

[humuhumunukunukuapuaa]

01:46 PM on 08/18/2010

I once had the pleasure of kayaking to those islands... had a great time!

[jweider]

10:37 PM on 08/18/2010

That would be a beautiful photo if that ugly chick in the lumberjack shirt wasn't messing it up.

[digitaljedi]

12:43 PM on 08/18/2010

AA is rubbish. And I mean that in an ironic sense, so you can print* that HP without offending your sponsor.

[Niobe Verreuil]

12:18 PM on 08/18/2010

"Inexpensi­ve leggings and t-shirts"?

No, if that's what AA was known for, they wouldn't be going bankrupt. They're known for their smutty ads and grossly overpriced leggings and shirts.

[torpedo77]

12:46 PM on 08/18/2010

Best t-shirts on the market.

[Nancy Motherway]

01:57 PM on 08/19/2010

Not to mention that they are of poor quality. I've purchased a number of items from AA online that arrived with holes in them, and leggings that tore after just a couple of wearings. If they boosted the quality of their products, I might consider shopping there again.