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Tiffany Montgomery
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American Apparel warns of dire conditions

By Tiffany Montgomery
August 17, 2010 7:00 AM

Troubles continue to mount for American Apparel, which warned this morning there is “substantial doubt” it can continue as a going concern.

The company said it expects to be in violation of its banking covenants as of September 30 based on business trends.

It’s current business plan forecasts losses from operations to continue at least through the third quarter, and it said it may not have enough liquidity to operate for the next 12 months.

The company also reported preliminary results for the second quarter.

Sales: down to $132 million to $134 million vs. $136.1 million during the same quarter last year.

Retail comps: down 16% in constant currency. The company operates a total of 279 stores.

Gross margin: down to 50% to 52% vs. previous Q2 margins of 59%.

Loss from operations: $5 million to $7 million vs. income of $7.3 million the same period last year.

Total debt: up $28.9 million to $120.3 million.

The company’s stock was down 14% in trading Tuesday morning.

 


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