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American Apparel in financial trouble, may go bankrupt

 August 18, 20154:42 PM MST

American Apparel is in financial trouble and may close their doors.

American Apparel is in financial trouble and may close their doors. Photo by Andrew Burton/Getty Images

American Apparel finds it hard to stay out of trouble. This time, the clothing brand admits that it may not be staying in business, due to a huge net loss. The made in America clothing company may not have their doors open for too much longer.

According to Fortune, American Apparel said on August 17, “We believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months. These factors, among others, raise substantial doubt that we may be able to continue as a going concern.” Their net loss just last quarter was $19.4 million, CNN Money reported.

The company also stated that it realizes the problem on hand and is extending their line of credit from $50 million to $90 million. Because of this huge loss, it is apparent that the company is coming close to being bankrupt.

“American Apparel said it’s considering some financial alternatives to right itself, including refinancing or restructuring its existing debt, according to the press release,” CNN reported. The press release also stated that the company has about $6.8 million cash on hand, and is due to pay $13.9 million by mid-October.

In the past year, many American Apparel locations have shut down. In July, USA Today reported that the store was going to close underperforming stores, as well as cut numerous jobs within the company, in an attempt to turn the business around. Clearly, it has not worked.

The press release stated that another reason for the huge drop was because of a decline in sales and “the lack of new style introduction for the spring and summer selling season.” Since last year, the American Apparel stock is down 86.8 percent.

The store is not giving up yet, though. Just in June, the company announced that Paula Schneider was the new CEO and are going to attempt to cut another $30 million in costs over the next year. Just last year, CEO Dov Charney was taken out of that position and in June was served a restraining order for accused sexual assault on employees.

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