(Filed Under Financial and General Interest News). American Apparel may be in trouble. The vertically-integrated retailer and wholesaler of fashion basics warned in its preliminary results for the first quarter of 2010 that it expects to soon be out of compliance with some of its loans. This may result in the company being unable to borrow under its revolving facility. “There can be no assurance that if either or both of these events were to take place, that the company would be able to obtain the additional sources of liquidity required to continue operations,” the company said in a statement.

The company’s debt widened approximately 11 percent during the first quarter, to $91.4 million from $83.4 million during last year’s first quarter. Loss from operations was $17.6 million, or a negative operation margin of 14.4 percent. The company estimated that the impact of lower manufacturing efficiency reduced its operating income by approximately $4.4 million, which it said: “could likely continue through the end of 2010, and could impact the company’s financial results at least through 2011.”

First quarter net sales increased 6.6 percent, to $121.8 million over sales of $114.3 million; however, comparable store sales decreased 10 percent. Retail net sales increased 1.5 percent, while wholesale net sales increased 21.6 percent.

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Published 06-02-2010 by Amanda Torres Price