Wall Street Journal
By Melodie Warner
American Apparel Inc. swung to a fourth-quarter loss on store-closure expenses and weak sales and reiterated doubts about its ability to continue as a going concern.
The clothing retailer, known for its risque marketing campaigns and colorful basic clothing, has long struggled with declining sales and mounting debt.
The company said it expects to post a 2011 loss from operations and generate negative cash flows. It said the going-concern opinion stems from global economic conditions, higher yarn and fabric prices and the possibility that the company could be prevented from borrowing under its revolving credit agreements.
"Our principal goal in 2011 is to stabilize the business and create a platform for renewed growth and increasing sales," said acting President Tom Casey.
Still, American Apparel said its sales declines are easing and it expects first quarter sales at stores open at least a year to show a percentage drop in the mid- to high-single digits, easing from the 11.5% decline seen in the fourth quarter. The company said it expects positive same-store sales for 2011.
For the fourth quarter, American Apparel reported a loss of $19.3 million, or 27 cents a share, compared with a profit of $3.1 million, or four cents a share, a year earlier. The latest quarter reflects higher payroll costs and store-closure-related charges. Sales dropped 8.9% to $144 million
Gross margin rose to 55.6% from 55% as manufacturing efficiency improved.
