American Apparel to cut costs, warns may need more funds
Struggling teen clothing retailer American Apparel Inc launched a restructuring plan to cut costs but warned it may not be enough to meet funding requirements in the next 12 months.
The company, which is being sued by founder and former CEO Dov Charney, said on Monday it would cut jobs and close stores to slash costs by about $30 million over the next 18 months.
American Apparel said there could be no guarantee that even after the restructuring it would have sufficient funds in the next 12 months unless it raised additional capital.
"... There can be no guarantee that (American Apparel) will be able to raise such additional capital," the company added.
American Apparel has been posting losses for last five years. During that period, its market value shrank to $90 million from $540 million.
The company is trying to emerge from a showdown with its founder and former CEO Dov Charney, who was ousted last year for allegedly misusing company funds and failing to stop a subordinate from creating defamatory blog posts about former employees.
American Apparel is facing about 20 lawsuits from Charney and shareholders.
Charney's ouster was a dramatic fall from power for a clothing trend-setter who, early in his career, won acclaim for making apparel in the United States when the bulk of the industry was producing overseas.
American Apparel said on Monday it would revamp its merchandise and launch a new fall line focused on basic clothing items.
The company, which has about 10,000 employees, did not disclose how many jobs it would cut or the number of stores it would close.
The company's shares were down 4 percent at 48 cents on Thursday on the American Exchange.