As other retailers prepare to start reporting their second-quarter results this week, American Apparel Inc. has informed the Securities and Exchange Commission that its numbers will neither be punctual nor profitable.
The increasingly embattled purveyor of chic basics said in an SEC filing late Tuesday that its new independent auditor, Marcum, needs more time to work through the figures for the second quarter, ended June 30, as well as those for the first quarter, which have yet to be filed.
The company offered a summary of what it expects its second-quarter figures to look like, and it contained little in the way of encouraging news. The firm anticipates a second-quarter loss against a net profit from the year-ago quarter. Net sales are expected to drop as declines in its retail business were only partially offset by increases in its sales with wholesale customers. Furthermore, the shift in its business towards wholesale, coupled with higher production costs, is expected to produce lower gross margins for the second quarter against its 2009 counterpart.
In effect, American Apparel now has two sets of auditors trying to make sense of its books.
Deloitte & Touche LLP resigned the account last month after identifying “material weaknesses in internal control” with respect to the closing and reporting of its figures. Additionally, American Apparel told the SEC, Deloitte became aware of certain information “that if further investigated may materially impact the reliability of either its previously issued audit report” or the financial statements made regarding fiscal 2009.
With Deloitte’s resignation, American Apparel brought back its previous auditor, Marcum, with which it had worked during fiscal 2008 and which had issued an adverse opinion about the company’s financial reporting in early 2009.
While Deloitte looks into the veracity of previous reports, Marcum will have to hustle to compile information for both the first and second quarters of the current fiscal year. American Apparel told the SEC on May 11 that its first-quarter report would be delayed — it still hasn’t been filed — and then on Tuesday made the same statement about its second-quarter data.
The audit problem is but the latest in a series of crises for the once high-flying chain. London-based Lion Capital helped it pay off a $51 million loan from SOF Investment in March, but just two months later American Apparel fell out of compliance with a covenant of the Lion loan covering its debt-to-EBITDA ratio. Last September, it laid off 1,500 immigrant workers who couldn’t show that they were in the U.S. legally, touching off a labor shortage that further hurt results.
It received a vote of confidence in June when Ronald Burkle of The Yucaipa Cos. LLC reported that he held over 4.3 million shares of AA, giving him a 6 percent stake in the firm.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast