Despite a restructured leadership, several rounds of layoffs and store closings, and a marketing revamp, American Apparel continues to suffer extreme financial losses.
The ailing company filed a notice with the SEC Wednesday concerning the delay of its quarterly report, explaining that management is wrapped up in negotiations with lender Capital One. They reported that the company lost approximately $19 million in the last quarter, with quarterly sales falling to about $134 million. The retailer announced that it doesn’t have enough money to get through the next year, and will need to explore new options for financing.
American Apparel has lost money every year since 2010, but according to Bloomberg, “While the company was losing money under Charney, the losses and the stock decline have accelerated since his departure. The shares sank to as low as 10 cents on Wednesday. They had already fallen 80 percent this year.”
According to the New York Post, a bankruptcy filing appears to be a strong possibility.
$3.6 million of the $19 million lost in the last quarter was eaten up by litigation costs; the company and ex-CEO/founder Dov Charney, who was fired in December, have been flinging lawsuits back and forth at each other since his ouster, and Charney recently filed a $30 million defamation lawsuit against hedge fund Standard General, one of the company’s biggest investors.
A press release sent last week by the General Brotherhood of Workers of American Apparel announced that union leader Esmeralda Morales Bermudez, a 31-year-old mother of three from El Salvador, was fired for sending union-related emails during company hours.
The emails were acknowledged by the company, and the management’s current media policy recognizes the right of employees to communicate freely among themselves, to the media, and the public. The union updates were prepared and sent during non-working hours, and timed to be released during the day when most employees would open their email messages.
So far, it looks like the cutthroat belt-tightening measures taken by CEO Paula Schneider and her board haven’t exactly paid off.
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