American Apparel Indicates to Go Out of Business

Published Date : Aug 19, 2015

America Apparel, the retailer that is facing mounting debt, diminishing sales and cash problems, stated that it may discontinue operation in a year. This was announced by the company at the release of the second quarter financial results, as the company is aggressively working towards a turnaround plan.

The trends that have been observed by the company between June 30, 2015 and at the time of the release, with the ongoing expectations and forecast for the four quarters in the next financial year, the company is not sure of there will be sufficient liquidity for operations for the next twelve months. 

All these factors, along with others, are substantial enough to speculate if the company will go out of business. 

On August 11, the company had US$11.2 million in cash with a debt interest payment accumulated US$13.9 million to be looming in two months. On last Monday, the credit facility of the company was transferred from Capital One to William Trust, an increase from US$50 million to US$90 million.

Due to being out of compliance with Capital One, along with debt and liquidity issues, American Apparel is in talk with advisers and stakeholders to chalk out a way going forward. This also includes the possibility of refinancing, new capital transactions, debt restricting, and amendment. However, to find a buyer was not listed in the strategic alternatives. 

In the second quarter, the revenue of American Apparel dropped by 17.2% to US$134.4 million and net loss reported to be up by 19.4% equivalent to US$19.3 million.

In June this year, the company produced a turnaround plan for investors. Under the leadership of CEO Paula Schneider, the company highlighted the turnaround plan as it continues to fight with ousted former CEO of the company Dov Charney.