Sep 13, 2019 | By Athena Chen
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Alarm bells are ringing again at American Apparel. The loss-making US apparel retail giant said it doesn’t expect to have sufficient financing in place to meet funding requirements for the next 12 months. It also forecast a wider loss and lower sales for Q2.
For the second quarter, American Apparel estimates a net loss of $19.35m/$0.11 per share, wider than the $16.21m/$0.09 loss in the year-ago period. The retailer sees net sales for the quarter down 17% year-on-year to around $134m.
In a filing with the Securities and Exchange Commission, American Apparel said it is unable to file its quarterly report on Form 10-Q for the second quarter ended June 30, within the prescribed time period. However, the company currently intends to file the Form 10-Q for Q2 within five days of its prescribed due date.
The retailer said that during the preparation and review of its interim Q2 financial statements, it identified potential non-compliance with its covenants related to an asset-backed revolving credit facility with Capital One Business Credit Corp.
American Apparel has been in talks with Capital One and other financial stakeholders regarding potential waivers to such a facility that may be required by such potential defaults. Due to these ongoing talks, the company was unable to complete its financial statements for Q2.
American Apparel noted that failure to obtain such waivers could have a material adverse effect on its financial condition and results of operations.
In addition, the company said it was informed by Standard General Group of that company’s intention to purchase all of the loans and commitments outstanding under the Capital One credit facility in accordance with its previously disclosed March 2015 agreement with Capital One.
American Apparel noted “substantial uncertainty” exists as to the ultimate outcome of its talks with Capital One and its other financial stakeholders.
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