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American Apparel Posts Wider Preliminary Loss Amid Lender Talks

American Apparel Inc. posted a wider second-quarter loss in a preliminary earnings statement and said it won’t be able to report official figures on time because its management is engaged in talks with lenders.
American Apparel store | Source: Shutterstock
By
  • Bloomberg

LOS ANGELES, United States — American Apparel Inc. posted a wider second-quarter loss in a preliminary earnings statement and said it won't be able to report official figures on time because its management is engaged in talks with lenders.

The net loss expanded to about $19.4 million, or 11 cents a share, from $16.2 million, or 9 cents, a year earlier, the company said Tuesday in a filing. Revenue sank about 17 percent to $134 million, the fourth straight decline. No analysts’ estimates were available for comparison.

The Los Angeles-based clothing maker has been in turmoil since it suspended and then fired founder and Chief Executive Officer Dov Charney for alleged misconduct. Charney, who was replaced as CEO by Paula Schneider, has sued over his ouster and said the allegations against him are baseless.

American Apparel said Tuesday that as it prepared second- quarter financial statements, it found that it may not be in compliance with certain financial-ratio provisions in its revolving credit facility with Capital One Financial Corp. The company is in ongoing discussions with Capital One and other financial stakeholders about potential waivers.

American Apparel said it also is working with advisers on potential strategic and financial alternatives, which may include refinancings, raising new capital or restructuring existing debts.

Mounting Losses

The company has racked up more than $300 million in losses since 2010, spurring it to raise cash several times. Earlier this year, it started selling shares on the open market. In July, the company said it couldn’t guarantee it would have enough cash to meet funding requirements for the next 12 months.

Schneider and Chairman Colleen Brown have embarked on a turnaround plan that includes cutting costs by eliminating jobs and closing stores. The chain also has toned down its sexualized marketing to broaden its appeal and worked to revamp several processes, including forecasting and budgeting.

As for the clothes, Schneider has refocused on basics as well as discounting and discontinuing items that weren’t selling well. Clearing out the old inventory has hurt profit margins.

The shares have fallen 80 percent this year.

By Matt Townsend; editors: Kevin Orland, Leslie Patton.

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