What would the world be like without American Apparel? What would your life be like without American Apparel? Naked? And cold, but with warmer ass cheeks? These questions, like it or not, become more real with each passing day as the clothing company’s financial woes reach terrifyingly dismal places. The company was just subpoenaed by the United States Attorney for the Southern District of New York for switching accounting firms, which sent the stock price tumbling 13 percent — leaving the shares dropping 66 percent as a whole over the last twelve months. The company has also failed to file its second-quarter earnings, while the SEC continues to threaten to de-list the company from the stock exchange. Meanwhile, CEO Dov Charney says that American Apparel might not meet obligations to creditors, which could lead to them losing access to their last lifeline of credit. All of these things, the company says, “raise substantial doubt that the company will be able to continue” under the threat of going bankrupt.
So how much do you love your leggings and your reasonably-but-kind-of-overpriced bat-wing hoodies? Do you love them? Do you really love them? Enter WWD:
“Based on this, and trends occurring in the company’s business after the second quarter and projected for the remainder of 2010, the company may not have sufficient liquidity necessary to sustain operations for the next twelve months,” American Apparel said.
The company estimates it has more than $91 million in debt at this point. Charney recently told Business Week:
“A lot of assumptions that I grew up with are no longer reality,” he says. “Those were things that we could rely on: that lenders will always be there, that they’ll behave ethically and they’ll always have money, that you can trust that as the sun comes up the consumer will be healthy, that we’ll always be close to full employment in developed nations. Now there are no certainties.”
American Apparel estimates second-quarter losses from operations — just operations! — to total around $5 to $7 million. Charney wears American Apparel exclusively. How many people like him are there in this world who would rather go naked than dress in past seasons’ AA? Now, if there’s a question we never wanted to know the answer to, that would be the one.
American Apparel Future in Doubt [WWD]
American Apparel Plummets as Woes Mount [DealBook/NYT]