American Apparel hangs on by a thread

Shares tumble after the clothing retailer reveals it might not make it through the year.

By TheStreet Staff Aug 17, 2010 2:24PM

the streetBy Jeanine Poggi, TheStreet

 

American Apparel's (APP) stock is taking a bloodbath after the clothier warned that its dwindling liquidity may not be enough to sustain it through the year.

 

The company said Tuesday that it may be unable to repay a loan due in September and that it is in talks with creditors. As of the end of the second quarter, its debt rose 32% to $120.3 million.

American Apparel said it would delay its second-quarter earnings report after its accounting firm, Deloitte & Touche, resigned last month. The company found a new auditor, Marcum, but said Tuesday that it has received a federal subpoena related to the switch.

 

Shares were plunging 22.3% Tuesday to $1.08 shortly before the market close and have fallen more than 60% in the past three months.

 

American Apparel predicts a second-quarter loss of between $5 million and $7 million on sales of $132 million to $134 million. In the second quarter of last year, the company reported a profit of $7.3 million on revenue of $136.1 million. Post continues after video:

American Apparel also expects same-store sales to plunge 16% and gross margin to fall between 50% and 52%, down from 59%.

 

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