Is this the end of American Apparel?
It’s been a whirlwind of a year for American Apparel, and not exactly in a good way. After the brand’s former CEO was ousted last year with several cases of sexual harassment and personal conduct charges to his name, we were really hopeful when Paula Schneider took his place. Will American Apparel finally get their act together and stop sexualizing underage models with their “naughty schoolgirl” vibe? Turned out the answer to that question was no, they were still OK with using ads that appear to sexualize school-aged children. In July, it appeared that all this upheaval and (deserved) backlash had put the company in some serious hot water when they started shutting down stores and laying off their employees.
Now, it looks as though the age of American Apparel is nigh. According to Fortune, the company recently warned its investors that its business has crashed so majorly that they’re not sure they’ll be able to stay afloat. Sales for the second quarter have dropped 17.2%; the company doesn’t have high hopes for its business to improve, and it may not even have enough cash to get through the next four quarters. Currently, American Apparel is trying to refinance its debt and raise new equity.
“We believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months,” the company said, according to Fortune. “These factors, among others, raise substantial doubt that we may be able to continue as a going concern.”
So is this the end of American Apparel? It certainly seems like it; the next scheduled payment the company must make is $13.9 million — more cash than the company has on hand and more than its borrowing capacity. Plus, shares have fallen a whopping 87% this year, trading at just 14 cents. Yikes. Unless American Apparel can figure out a magical way to turn things around (and FAST — their next scheduled payment is due mid-October), they’ll be shutting all their doors for good.
“You are trying to save the Titanic when the bow is already 10 feet underwater,” Craig Johnson of Customer Growth Partners told Los Angeles Times about the company’s plight. “It’s not impossible, but it’s a very tall order to do.”
In July, American Apparel sent out a press release chock-full of corporate jargon that announced the “next phase of their strategic turnaround plan”:
Yeah, none of that sounded terribly convincing to us, either. And now, it looks as though their constant gravitation towards sexist marketing may have put them permanently in the ground.
(Image via iStockPhoto.)