• Q3 net loss widens to US$25.6m
  • Gross margin narrows to 42.6%
  • Sales tumble 19.1% to $126.05m
American Apparel is in the midst of a turnaround to exit Chapter 11

American Apparel is in the midst of a turnaround to exit Chapter 11

American Apparel saw its losses deepen in the third quarter as the US fashion group works through a reorganisation plan aimed at exiting Chapter 11 bankruptcy. 

Net losses for the three months to the end of September widened to US$25.6m from a loss of $19.2m in the prior year period. American Apparel said the drop was primarily due to the change in fair value of warrants of $4.8m, offset by an increase in loss from operations of $10.2m.

Net sales for the period were down 19.1% to $126.05m, hurt by the strengthening of the US dollar. Same-store sales declined 14% across its 127 stores, negatively impacted by a lack of new style introductions for autumn and winter. American Apparel said it ended the quarter with $13.4m in cash.

Gross margin narrowed to 42.6% from 53% due to the foreign exchange impact of the strengthening US dollar and higher costs of production, including an increase in workers' compensation and health benefit costs.

Late last month, American Apparel had its bankruptcy exit plan approved by a US court, dashing former CEO Dov Charney's hopes of regaining control of the company. The founder had made a $300m bid for the group, backed by two private equity firms, which was later declined. 

Charney said Chapter 11 was an effective defensive measure by bondholders and current management to thwart his efforts to preserve the value of the company. He has since suggested he may launch a rival company.

American Apparel reorganisation ends Charney hopes