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American Apparel in new bankruptcy warning | American Apparel in new bankruptcy warning |
(40 minutes later) | |
The US clothing chain American Apparel has said that there is "substantial doubt" the firm can continue as a going concern. | The US clothing chain American Apparel has said that there is "substantial doubt" the firm can continue as a going concern. |
But although the wording appeared in its financial statement for the fourth quarter, the company's controversial founder played down the warning. | But although the wording appeared in its financial statement for the fourth quarter, the company's controversial founder played down the warning. |
The company has been criticised for sexually overt advertising. Its founder is fighting sexual harassment charges. | The company has been criticised for sexually overt advertising. Its founder is fighting sexual harassment charges. |
Shares were hard hit after the statement but closed barely changed. | |
American Apparel, which has 273 stores and 12,000 employees worldwide, reported sales down by 8.9% at $144m (£89.4m). | American Apparel, which has 273 stores and 12,000 employees worldwide, reported sales down by 8.9% at $144m (£89.4m). |
The statement said: "2010 was an extremely challenging but productive year. We suffered the after-effects of a major labor disruption resulting from an immigration intervention in 2009." | The statement said: "2010 was an extremely challenging but productive year. We suffered the after-effects of a major labor disruption resulting from an immigration intervention in 2009." |
In that year a number of its employees were found to be illegal immigrants. | In that year a number of its employees were found to be illegal immigrants. |
'Extraordinary challenge' | 'Extraordinary challenge' |
It said the disruption to its production schedule led to "significantly higher production costs" per unit and late deliveries of products to stores and wholesalers. | It said the disruption to its production schedule led to "significantly higher production costs" per unit and late deliveries of products to stores and wholesalers. |
It also referred to what it called "extraordinarily challenging world-wide economic conditions" and higher raw material prices. | It also referred to what it called "extraordinarily challenging world-wide economic conditions" and higher raw material prices. |
It said there was "substantial doubt that the Company will be able to continue as a going concern" and that it could be prevented from borrowing under its credit agreements. | It said there was "substantial doubt that the Company will be able to continue as a going concern" and that it could be prevented from borrowing under its credit agreements. |
The annual report said the company may determine that it is in its best interests to file for a pre-packaged, pre-arranged or other type of Chapter 11 bankruptcy. | The annual report said the company may determine that it is in its best interests to file for a pre-packaged, pre-arranged or other type of Chapter 11 bankruptcy. |
But the founder, Dov Charney, played down the warning. | But the founder, Dov Charney, played down the warning. |
He told the Reuters news agency that the warning was a formality, saying: "We have to put it as a risk factor if it's in the realm of possibility, even if it's one in 1,000." | He told the Reuters news agency that the warning was a formality, saying: "We have to put it as a risk factor if it's in the realm of possibility, even if it's one in 1,000." |
American Apparel has been expressing doubts about its ability to continue as a going concern since last August. | American Apparel has been expressing doubts about its ability to continue as a going concern since last August. |
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