Retailer American Apparel has warned that it will struggle to file its second quarter financial results on time, adding that it expects to post a loss on declining retail sales.

The US company is also facing the threat of legal action from law firm Levi & Korsinsky, which said it was investigating potential claims from shareholders related to the resignation of Deloitte & Touche as the retailer’s independent registered public accounting firm.

Shares in the business have plunged amid concerns that it might be unable to cope with mounting debts linked to an expanding retail portfolio, and exacerbated by falling sales.

In a filing to the Securities and Exchange Commission (SEC), American Apparel said it would not be able to file its quarterly report for the three months to 30 June on time, “without unreasonable effort and expense”.

The company was previously threatened with being delisted by the New York Stock Exchange for not filing its first quarter results on time.

American Apparel said it expected to post a loss for the second quarter, impacted by falling retail revenues and a higher cost of sales linked to the increased number of retail stores in operation.

Production efficiency has also been hit by 1,500 enforced lay-offs at its Los Angeles production facilities, brought about by US government claims that the workers were not authorised to work in the country.

Levi & Korsinsky said its investigations were centred on an audit report issued by Deloitte on 31 March this year, in which “material weaknesses” in the company’s controls over financial reporting were identified.