American Apparel Face Meltdown


Photo: American Apparel / butterboom.com

Giants of budget body con have run into some pretty sticky situations this year and come out alive and kicking on the other side, but scandals surrounding employee dress codes and advertising pale in comparison to the financial difficulty that could see them face total collapse. The LA-based brand have been flaunting on loan paybacks in a major way and time is running out fast. Last month, the company reported a $17.6 million quarterly operating loss on sales of $121.8 million, but Exec Dov Charney isn’t fussed; ““Our company in the past has been through these types of issues before and it’s never really presented us with any particular difficulties in running our business.” Is he playing it cool or does he really think AA can get through this? Some people think the answer is obvious. Retail consultant and investment banker Howard Davidowitz reckons, “American Apparel is unique because they’re on the cusp of a total collapse.You don’t have many people out there breaching their loan covenants. They are not a going-forward company until they can resolve the financial issues.” Whatever happens, American Apparel better be praying for a miracle and fast. This financial crisis thing has hit some in the industry harder than others, with companies reporting unsustainable damage and folding all over the shop. Think Luella, Christian Lacroix, etc. With an aging brand image and newer, cooler kids on the block (Diesel can do near porn-shot ad’s too now, remember?), the kings of stretch-jersey have a hard reality pill to swallow.

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