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American Apparel warns of likely sales drop, loss

Troubled clothing firm American Apparel Inc. said Tuesday that its second-quarter sales probably fell compared with a year earlier and that it expected to report a loss.

In a filing with the Securities and Exchange Commission, the Los Angeles company also said that it was “unable, without unreasonable effort and expense,” to file its quarterly report on time for the three months that ended June 30.

The company blamed its weak total sales on a decrease in retail sales, although it didn’t provide specific figures. American Apparel is known for its sexy advertising and for its colorful basics such as T-shirts and leggings, although the company recently began expanding to preppier styles.

The news was the latest in a long string of problems for American Apparel. Last month, the company’s stock plunged after it announced that Deloitte & Touche had resigned as its independent public accounting firm.

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The company was also threatened with being delisted by the New York Stock Exchange because it failed to file its first-quarter earnings report on time.

American Apparel is also struggling with reduced manufacturing efficiency at its production facilities after laying off 1,500 workers in September.

Those job cuts stemmed from a government inspection last year that found that hundreds of American Apparel workers didn’t appear to be authorized to work in the United States.

The company’s problems have led some to speculate that it could be a target for a takeover or bankruptcy filing, which the company had flirted with in late 2008. In June, billionaire investor Ron Burkle disclosed that he had acquired a 6% stake in the company.

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Still, American Apparel’s flamboyant chief executive, Dov Charney, has remained upbeat, repeatedly telling The Times that he was feeling good about the company’s prospects. When reached by phone Tuesday and asked to comment about its latest filing, Charney said: “I don’t know anything about it.”

Shares of American Apparel fell 6 cents, or 4%, to $1.44.

andrea.chang@latimes.com


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