American Apparel, the Los Angeles based company warned on Monday that due to it’s sliding sales and dwindling cash flow, it may not have enough cash to meet short-term obligations to keep operating for the next one year, according to a filing with the U.S. Securities and Exchange Commission. The company said that the losses may continue through the rest of this year.
All these factors, American Apparel said, “raise considerable doubt that we may be able to continue operating for a period of time.”
The warning comes as the company announced a second quarter besides its original estimates filed with the SEC last week. The sales fell 17% to $134 million and net loss increased to $19.4 million, equal to 11 cents drop per share in the second quarter.
American Apparel’s sliding cash position is making it to think of filing for Chapter 11 bankruptcy, as per analysts. This could help the American clothing manufacturer to get out of leases for stores not performing as expected, which is crucial for decreasing the costs and reversing the business.
Craig Johnson of Customer Growth Partners said, “It’s very hard to achieve to save the company now without exiting most of the leases, It has to be done.”
The company has been on a carefree ride since the board fired Dov Charney as CEO and chairman last year.