Troubles Grow for American Apparel

American Apparel Inc. (Los Angeles), the vertically integrated manufacturer and retailer of branded fashion apparel, expects to report net sales in the range of $132 million to $134 million, a drop from $136.1 million for the same period last year, according to its preliminary financial results for the second quarter ended June 30, 2010. Same-store sales are also down, declining 16 percent on a constant currency basis.

Loss from operations for the second quarter of 2010 is expected to be in the range of $5 million to $7 million, while the retailers’ total debt grew to $120.3 million.

Based on these losses, negative cash flows and trends occurring in the company's business after the second quarter, American Apparel says it “may not have sufficient liquidity necessary to sustain operations for the next twelve months.”

In its quarterly report, the retailer also disclosed news that it has received a subpoena from the United States Attorney for the Southern District of New York regarding its switch to Marcum from Deloitte as its independent auditor. It has also received “inquiries” from the Securities and Exchange Commission.

The news sent shares in American Apparel down more than 13 percent.

The company opened its first retail store opened in 2003 and today operates more than 260 stores worldwide in 20 countries, including the U.S., Canada, Mexico, Brazil, U.K., Ireland, Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea and China.