American Apparel Says It Might Not Have Enough Money to Last the Year

Without raising more funding, that is.
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Eliza Brooke
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Without raising more funding, that is.
An American Apparel store last year. Photo: Andrew Burton/Getty Images

An American Apparel store last year. Photo: Andrew Burton/Getty Images

Between sinking sales and mounting legal fees, you might wonder how American Apparel has enough money to operate an international business. On Monday, the company provided a response to that question: it might not.

In a press release published on its website, American Apparel said that for the "next phase" of its turnaround plan, it's putting in place cost-cutting measures that could reduce operating expenses by $30 million. (For context, the retailer lost $26 million in the first quarter of the year.) At the same time, CEO Paula Schneider says the team is working hard on making the fall assortment as strong a revenue driver as possible. Still, that might not be enough for it to stay in business without some outside help.

"Even if American Apparel increases revenue and cuts costs, there can be no guarantee that the Company will have sufficient financing commitments to meet funding requirements for the next 12 months without raising additional capital, and there can be no guarantee that it will be able to raise such additional capital," the company said in a statement.

As for the aforementioned cost reduction initiatives, American Apparel says it plans to close underperforming stores while opening others in more promising areas and to "streamline its workforce to reflect a smaller store footprint and general industry conditions." How large a round of layoffs will result from that remains to be seen; we've reached out to a company rep and will update when we hear back.

Update: According to a source briefed on the matter, the "vast majority" of layoffs will be in American Apparel's head office and retail.