The second quarter offered little comfort to the cash-strapped American Apparel Inc.
The company said in a regulatory filing that its second-quarter net losses widened to $19.4 million from $16.2 million a year ago, while sales for the three months ended June 30 dropped 17 percent to $134 million.
American Apparel also said that it might be out of compliance with covenants on its credit facility and delayed its quarterly filing with the Securities and Exchange Commission. The company said it’s been in “ongoing discussions” with Capital One regarding potential waivers for the roughly $34 million facility, which New York investor Standard General intends to purchase.
Standard General linked up with ousted founder Dov Charney last year, but the two sides had a falling out. Charney was fired and has sued, while the New York investor is set to gain more influence over the firm.
The fight has taken its toll and American Apparel paid out $3.6 million in legal, litigation and consulting fees during the second quarter.
And American Apparel needs every penny. The company said in the filing that it “does not currently expect that it will have sufficient financing commitments to meet funding requirements for the next 12 months without raising additional capital and/or entering into some other financing transaction or agreement.”
At its annual meeting last month, investors rejected a proposal that would have allowed the company to issue more shares and raise funds by selling them.
The stock has been hit hard and traded up 1.7 percent to 20 cents prior to the update after the market closed. That left the company with a market capitalization of just $37.8 million.