Embattled American Apparel issues blunt warning to shareholders

New York -- Things are not getting any better at the struggling and cash-poor American Apparel. In fact, it looks like they are getting worse.



In a short form quarterly filing, the retailer said its net loss increased to $19.4 million in the second quarter from $16.2 million in the year-ago period while net sales fell 17% to $134 million. It estimated that, as of June 30, it had only $7 million in cash and $6 million left in its Capital One credit line. (American Apparel’s full quarterly filing will be delayed.)



In the filing, American Apparel said it has “begun discussions with key financial stakeholders to analyze potential strategic and financial alternatives … including restructuring and recapitalization transactions.” It also issued a blunt warning to its shareholders.



“The company’s existing and any new investors could suffer substantial or total losses of their investment in its common stock,” American Apparel said in the filing.



The retailer is challenged on several fronts, and is facing nearly 20 lawsuits brought on by founder and deposed CEO Dov Charney.



Earlier this summer, American Apparel, under the leadership of new CEO Paula Schneider, announced an ambitious turnaround plan. But it now appears it may not have the cash needed to put it in motion.