Problems continue at United States clothing company American Apparel, in which businessman Eric Watson has a stake.This week the company raised "substantial" doubt about its ability to continue as a going concern and warned it could breach a loa
Problems continue at United States clothing company American Apparel, in which businessman Eric Watson has a stake.
This week the company raised "substantial" doubt about its ability to continue as a going concern and warned it could breach a loan covenant.
The company also said in a regulatory filing that it received a subpoena from the US Attorney's Office for the Southern District of New York in July, as well as inquiries from the US Securities and Exchange Commission regarding the resignation of its former auditors, Reuters reported.
American Apparel's former auditor Deloitte had quit in March after warning of problems with the company's financial reporting, and the subsequent reliability of its financial statements for the year ended December 31.
American Apparel chief executive Dov Charney, who was also its largest shareholder, had been repeatedly sued for sexual harassment and the company had faced several problems in recent months from underperforming results to mass layoffs of illegal workers, Reuters said.
The Los Angeles-based company opened its first retail store in 2003.
Popular with urban hipsters for "Made-in-USA" retro apparel, the company now sees losses from operations continuing through at least the third quarter, and said it may not have sufficient liquidity to continue to operate through next year, Reuters reported.
It also expected substantial operating loss and negative cash flows for the six months ended June 30.
For the second quarter, the company forecast sales of about $US132 million ($NZ184.8m) to $US134m, down from $136.1m a year ago. Same-store sales, which fell in 11 out of 12 months in 2009, were down 16 percent in the quarter.
American Apparel shares closed at US81c in the latest trading session, having already plunged 26 percent to an all-time closing low of $US1.03 the day before.
Mr Watson took a stake in American Apparel with US billionaire Jon Dedecky through Endeavor Acquisition Corp.
