Based on current trends and projections, American Apparel said in a regulatory filing, “We believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months”.
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American Apparel’s sliding cash position is making it to think of filing for Chapter 11 bankruptcy, as per analysts.
The company witnessed a bad quarter report with sales declined 17% amounting to $US134 million and the nest loss increased to $US19.4 million.
American Apparel has “substantial doubt” it will stay in business, the company said Monday.
Announcing its second-quarter earnings, the embattled retailer reported that it 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”.
The company has been on a rollicking ride since the board ousted Dov Charney as chief executive and chairman past year. Moreover, the former CEO sued the company over his removal and claimed that the allegations against him are baseless.
The firm has been posting losses for the last five years, a period which has seen its market value shrink from $540m to $90m. That could include selling off assets and looking at alternative distribution, such as carrying American Apparel clothes in department stores overseas. “It’s not impossible, but it’s a very tall order to do”.
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According to its balance sheet, American Apparel has about $6.8 million in cash on hand. A group of creditors, including hedge fund Standard General, is replacing the Capital One credit line of $50 million with a $90 million one instead. It also plans to cut costs by another $30 million over the next 18 months.
