Business & Economy

American Apparel says there is 'substantial doubt' it will survive as a business

A worker moves several boxes of American Apparel garments on the sewing floor in Los Angeles in this 2004 file photo. The Los Angeles-based retail giant said Monday, August 17, 2015, that recent losses and future projections
A worker moves several boxes of American Apparel garments on the sewing floor in Los Angeles in this 2004 file photo. The Los Angeles-based retail giant said Monday, August 17, 2015, that recent losses and future projections "raise substantial doubt that we may be able to continue as a going concern."
Ric Francis/AP

American Apparel may not be able to stay in business much longer.

The struggling clothing giant on Monday reported a second quarter net loss of $19.4 million, adding to a string of similar losses earlier this year and last. The company said that whatever steps it might take now to stay afloat may not be enough.

From American Apparel's press statement:

"Based upon the trends occurring in our operations since June 30, 2015 and through the date of this release, together with our current expectations and projections for the next four fiscal quarters, we believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months. These factors, among others, raise substantial doubt that we may be able to continue as a going concern."

American Apparel has banked on its brand as a made-in-L.A. clothing store and manufacturer known as much for its highly sexualized ad campaigns as for the goods it sells, but the company has faced mounting problems over its finances and its public image.

Company founder and former CEO Dov Charney had been the subject of allegations of misconduct — namely, sexual harassment — for years before he was fired last December. Lawsuits have been filed back and forth as a result. The company hired another fashion executive, Paula Schneider, to take Charney’s place.

In the first half of 2014, AA saw a net loss of $21.7 million. During the same period this year, the company had a loss of $45.8 million.

In June, the company announced a “multi-year strategic turnaround plan” to get back on track. The plan was to build a $1 billion brand by refocusing efforts across the board, rethinking products, sales opportunities, supply chain and expense management — even those racy ads.

In its own words, the company noted some of the photographs used on billboards and in magazine spreads have employed “nudity and blatant sexual innuendo,” in some cases making use of an “inappropriate sexual pose.”

Whether its turnaround plan can work remains to be seen. American Apparel has seen its cash reserves dwindle and “said in a filing that it may have to raise more capital, restructure its debt or seek bankruptcy protection from creditors,” according to Bloomberg’s Matthew Townsend.

A shuttered or bankrupt American Apparel could be bad news for Los Angeles, Townsend told KPCC’s Take Two. The company said it currently employs about 10,000 people at 239 retail stores in 40 countries, but many of those people are employed locally.

“You know there’s a couple of thousand people who work at their L.A. headquarters,” Townsend said. “Probably L.A. and New York are its two biggest cities for store locations, so all the people working in those stores or servicing those stores would be out of a job.”