American Apparel warns it may need more funds as costs are cut

Kasmira Jefford
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American Apparel has been posting losses for the last five years (Source: Getty)
American Apparel, the troubled clothing chain embroiled in a legal battle with its founder and former chief executive Dov Charney, announced plans yesterday to slash around $30m (£19m) of costs in a bid to reverse sharp losses and turn itself around.

The company said it will close underperforming stores and would cut jobs in order to reduce costs over the next 18 months. However, it warned there could be no guarantee that even after the restructuring it would have sufficient funds in the next 12 months unless it raised extra capital.

“We are committed to turning this company around. [Yesterday’s] announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability,” said Paula Schneider, the retailer’s chief executive.

American Apparel has been posting losses for the last five years and is also trying to emerge from a showdown with Charney, who was ousted last year for allegedly misusing company funds and after a series of misconduct allegations made by staff. It is facing about 20 lawsuits from Charney and shareholders.

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