It now costs roughly 62 shares of American Apparel to buy a velvet crop tee from the retailer, before shipping and handling.
Reuters Staff / Reuters
American Apparel's shares are flailing after the company reported dismal first-quarter results and announced plans to raise money by selling $10 million of stock.
The stock is down 6% Tuesday, trading at 61 cents a share, and fell to as low as 59 cents a share in the wake of the earnings results, posted after the close of trading Monday. The results showed sales are falling and losses are deepening, almost a year after it first served founder Dov Charney with a termination letter in June 2014.
It would now take more than 60 shares to cover the cost of many of the company's crop tops and dresses, and almost 100 shares to pay for the company's new "Denim Tent Dress." That's more than twice as many as it would have taken back in July 2014, when American Apparel shares jumped to $1.21 in the wake of Charney's termination.
The company is also in search of cash, saying it would sell $10 million of its stock to raise additional funds "for working capital and general corporate purposes."
That stock sale won't represent the only money the company has raised lately. American Apparel said it got a five-year, $15-million loan in March from Standard General, the hedge fund that now controls the company. The deal came with an interest rate of 14%.
American Apparel's new management has spent most of this year coming up with a plan to turn the struggling clothing brand around while fighting legal battles with Charney and former employees who remain loyal to him. Last week Charney filed a lawsuit accusing Standard General of defamation, seeking $30 million in damages.
American Apparel said yesterday that sales in the first quarter tumbled 9% to $124 million while gross profit fell 34% to $47.5 million. Its net loss widened to $26.4 million, or 15 cents a share, from a $5.5 million loss in the same period last year. Legal, litigation, and consulting fees cost almost $1.5 million in the first quarter. The figures are in line with internal sales and profit data leaked to BuzzFeed News last month and follow a 4% sales drop for 2014.
The leaked sales documents, which were unaudited and didn't provide finalized numbers, showed sales at American Apparel's retail stores were down 10.9% as of March 31 from the same period last year and down 2.3% at the wholesale division. Comparable revenue was up 17.8% online in the three months, the documents showed. American Apparel's shares fell about 6% to 65 cents a share on April 7, the day after the report ran.
Paula Schneider, the company's CEO, noted that American Apparel's clearance sale, which started on Black Friday and concluded at the end of March, was "unprecedented," and successfully pushed out one million "slow selling units," in a letter addressed to employees dated May 11.
"It is important to note that overall the margins for the entire sale were still above the cost to produce the goods," she wrote, expressing confidence in the company's future results. "If we had tried to liquidate through third parties, then we probably would have had to sell below cost."
She added: "I know most of you are supportive of the vision for the company and our plans to create a sustainable and financially sound American Apparel."
Schneider, who began as CEO in January, told Bloomberg News in an interview that "it's going to take a couple quarters to start showing off our brighter side."
She also noted that she's not in close contact with Charney.
"Dov's agenda is becoming abundantly clear with all the lawsuits that are flying toward us, but at the end of the day we have a really strong strategic plan," Schneider told the news service. "We haven't spoken in quite a while."
LINK: American Apparel Founder Sues Over “Show Trial” That Ousted Him
LINK: Internal American Apparel Data Shows Sales Are Slumping
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