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American Apparel faces tough times

Things are going from bad to worse at American Apparel. The Los Angeles-based US fashion retailer, is experiencing low sales as its debt mounts. It fears it might not be able to meet funding commitments for the next 12 months even if it increases revenue and cuts costs.

The brand is best known for its racy advertising and its practice of making its clothes in Los Angeles' garment district rather than in Asia. American Apparel has racked up about 340 million dollars in net losses in the last five years. It has more than 200 million dollars in debt and negative shareholders’ equity.

The company has been embroiled in boardroom turmoil, and last year ousted its controversial chief executive Dov Charney in a public clash. Earlier this year, it announced plans to raise as much as $10 million from share sales after it reported a jump in first quarter losses. American Apparel has announced $30 million cost cutting measures in a bid to stabilise business. This includes job cuts and store closures. The retailer operates 239 stores and employs 10,000 workers. It plans to close underperforming retail locations in unprofitable and over-saturated markets and looks to add new stores in profitable fast-growing territories.


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