The struggling apparel and accessory retailer, American Apparel Inc (NYSEMKT:APP) is drifting towards bankruptcy, as the company recently announced it does not have enough funds to run operations for the next 12 months.
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American Apparel said it was in talks with the lender – Capital One Business Credit Corp – to waive the non-compliance, but said there could be no guarantee of a waiver.
American Apparel has posted losses for the past five years and has been caught in a legal tussle with its former chief executive, Dov Charney, who was terminated in December following allegations of misconduct and violating company policy.
The company did, however, report preliminary estimates for the second quarter ended June 30 in its filing.
The retailer also warned on Tuesday that existing and any new investors could suffer substantial or total losses of their investment in its common stock.
The corporate stated in July that it will revamp its fall clothes line and shut some shops to chop prices, and it warned it won’t have sufficient financing for the subsequent yr. In a submitting Tuesday with the Securities and Change Fee, American Attire confirmed that’s the case. 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.
Net sales fell about 17% to $134 million while sales at established stores fell 14% adjusting for currency fluctuations.
Things have gone from bad to worse at American Apparel. Nevertheless the corporate estimated that it misplaced about $19 million, or 11 cents per share, within the quarter led to June. That included $3.6 million in costs related to litigation. During that period, its market value shrank to $90 million from $540 million.
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Shares of American Attire have commerce beneath $1 for a lot of the final yr. They reached a low of 10 cents on Wednesday.
