American Apparel Inc. on Tuesday posted a third-quarter loss, but said the company is working with its primary lender to put the business back on track.

This story first appeared in the November 10, 2010 issue of WWD. Subscribe Today.

For the three months ended Sept. 30, the net loss was $9.5 million, or 13 cents a diluted share, versus net income of $4.2 million, or 5 cents, a year ago. Sales fell 10.5 percent, to $134.5 million from $150.3 million, and dropped 16 percent on a comparable-store basis.

Last month, Lion Capital amended terms of American Apparel’s loan agreement to prevent it from falling out of compliance with the pact.

Tom Casey, the former Blockbuster Inc. executive who joined the Los Angeles-based firm as acting president last month, said, “We expect to improve financial results by supporting the brand with a customer-focused supply chain, leveraging our speed to market capability with lower distribution costs. We are optimizing our retail store base through investments in technology and improved allocation while lowering our lease costs.”

Dov Charney, chairman, chief executive officer and founder, said the company was working with Lion “to develop a strategic plan consistent with our capital structure.” He reiterated that the firm was in the process of hiring additional executives.

Charney added that he’s seen “reinvigorated interest” in the brand and that the company plans on driving sales of its basics as it “aligns product design and development with more efficient manufacturing.”

Earlier this month, the firm belatedly reported a second-quarter net loss of $14.7 million, or 21 cents a diluted share, as sales fell 2.4 percent to $132.7 million.

American Apparel attributed the decline in third-quarter gross margin — to 52.2 percent of sales from 58.1 percent in the prior-year quarter — to increased production costs due to lower labor efficiency, a continued shift in production toward more complex retail styles and greater reliance on wholesale, rather than retail, operations for revenue.

The company ended the quarter with 278 stores.

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