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Beleaguered American Apparel May Finally Have To Shut Down

With falling sales and legal troubles, the clothing retailer doesn’t have enough cash on hand to make its debt payments.

Beleaguered American Apparel May Finally Have To Shut Down
[Photo: Flickr user istolethetv]

American Apparel appears to be on the brink of bankruptcy, according to a regulatory filing from the company.

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The L.A.-based clothing brand has been embroiled in a legal battle with its now-notorious founder and former CEO Dov Charney, whom the company fired last December.

In the filing, American Apparel details its current financial woes–sales for the second quarter tallied $134.4 million, which is a 17.2% drop year over year. The company’s shares are currently trading at $0.15, and according to the filing, the loss per share in the second quarter of this year was $0.11.

American Apparel CFO Hassan Natha wrote:

We incurred losses from operations and negative cash flows from operating activities for the six months ended June 30, 2015 and such losses might continue for the remainder of 2015. Based upon the trends occurring in our operations since June 30, 2015 and through the date of this release, together with our current expectations and projections for the next four fiscal quarters, we believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months. These factors, among others, raise substantial doubt that we may be able to continue as a going concern.

In an effort to stanch the flow of its cash losses, the company also has a “strategic turnaround plan” that will try to cut $30 million in costs over the next 18 months–a move that will likely be futile, if American Apparel can’t dig itself out of its debt hole in the short term.

The company says it is exploring its options with lenders, trying to find a way to meet its debt payments. American Apparel’s next scheduled interest payment for $13.9 million on debt owed will be due Oct. 15, and it currently doesn’t have the cash to pay it.

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