American Apparel is in some serious trouble -- and that's aside from the various sexual harassment lawsuits filed against CEO Dov Charney.
Women's Wear Daily writes that the company is running out of money, reporting a net loss of $86.3 million, with only $5.3 million in the bank (we're rounding off here). And the label owes about $143 million to different lenders and facilities, if we're doing the math correctly. Charney and co. have until April 30 to prove that they will be able to ultimately pay back the money they owe.
Howard Davidowitz, chairman of New York-based Davidowitz & Associates, told the fashion newspaper, "Without an additional injection of cash, the company is done. Somebody has to write a check." But Charney dispelled any bankruptcy filing rumors, saying, "In my opinion, there's no chance of that. That's not an option we are going to explore. We have a variety of options. We could do a private placement of stock. Or we could use the resources we have. We do $10 million a week in sales."
However, last week the Associated Press wrote, "Troubled clothing chain American Apparel Inc., losing money and faced with a cash crunch, says it may have to file for Chapter 11 bankruptcy protection," so someone, maybe not Charney, necessarily (tied up in court with former employees much?) considers bankruptcy to be an option.
The New York company warned in a filing with the Securities and Exchange Commission Thursday that it "may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy Code" if it can't improve its sales or cash position or find other sources of financing to keep it afloat.
The retailer known for its sexually provocative advertising also indicated that even if it does file for bankruptcy, it may be forced to liquidate if it can't put together a reorganization plan or find bankruptcy financing.
Meanwhile, it's business as usual in stores, Fashionista reports. On Monday, American Apparel launched a new denim line after developing the $80 duds for a year. Charney said in a press release, "Jeans are an iconic, essential part of the modern wardrobe, just like the t-shirt. No one does basics like American Apparel. We've mastered the basic t-shirt, now we're getting excited about jeans."
At least there's something to be excited about.
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