While 2014 was a largely turbulent year for American Apparel, the fashion retailer has continued to sink and has now revealed that it may be forced to seek bankruptcy protection by the end of the year.
The American fashion brand has been plagued by continuous decreasing sales figures and internal scandal. Second-quarter sales fell by 17.2% to $134m and net losses rose to $19.4m. This was coupled with a 25.3% fall in profit from $82.4m to $61.5m. By the end of June the company only had $6.9m remaining to fund ongoing operations and has said substantial economic improvement by the end of the year is not in sight.
In addition to American Apparel’s disastrous current trading figures, the company has long and hard-to-revoke property leases and an ongoing debt of $235m. Investors of the retailer are not likely to receive a significant amount if a bidder took a gamble and bought the company.
American Apparel Chief Financial Officer Hasan Natha said that the brand may not have “sufficient liquidity necessary” to sustain the business over the next 12 months.
"These factors, among others, raise substantial doubt that we may be able to continue as a going concern,” Natha added.
The LA clothing brand plans to implement a $30m strategic turn-around plan driven by cost cutting strategies over the next 18 months.