Under-pressure clothing company American Apparel admitted it might go out of business within a year following an expected second quarter loss and amid mounting debts.
Unveiling estimated and delayed second quarter results for the period to 30 June, the US company said net sales were expected to fall to US$132-134m, down from $136.1m.
Comparable store sales slumped by an estimated 16%, and the company expects to report a $5-7m loss from operations, compared to a profit of $7.3m the year before.
American Apparel said debts had risen $28.9m to $120.3m and said that, if current trading conditions continued, it would default on its credit agreement as of 30 September.
That could result in a freeze on borrowing, possibly leaving the company without the necessary finances to continue operations for the next 12 months, American Apparel said.
“The company’s current operating plan indicates that losses from operations are expected to continue through at least the third quarter of 2010,” it added.
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By GlobalData“These factors, among others, raise substantial doubt that the company will be able to continue as a going concern.”
However, American Apparel said its management was continuing to develop a plan to improve its operating performance, and would negotiate with lenders to try to review the terms of its current credit agreements.
Click here for just-style’s analysis on American Apparel.
