This Mess Was Made in America

The rise and near collapse of seven-year-old startup American Apparel took another turn for the worse today. The company, known for its trendy made-in-America clothing, warned that it may not make it as a going concern, an admission that sent its shares down 22 percent to $1.08 on the American Stock Exchange. The shares are down 66 percent over the last year and traded at $16.75 as recently as 2007.

American Apparel has since run into an array of troubles, including sexual-harassment allegations aimed at CEO and largest shareholder, Dov Charney, who was the subject of an extensive profile in Condé Nast Portfolio magazine. The company also has been forced to lay off many of the illegal workers whom Charney championed.

Lately, though, its troubles are business related. It said today it expects to report an operating loss for the first half of the year, and sales for the period are expected to drop to about $132 million from $136 million. Same-store sales are down 16 percent for the second quarter, and the U.S. attorney and the SEC are looking into the resignation of company auditor Deloitte.

To make matters worse, the company warned on Tuesday that it may not be in compliance with debt covenants. American Apparel, taken public in 2007 in a reverse merger by Endeavor Acquisition, has been struggling with $91 million in high-yield debt. One $66 million loan carries an interest rate of 15 percent to percent, according to the New York Times. That is incredibly high, even by the standards of the high-yield market.

The company told Bloomberg BusinessWeek that it is moving away from its hipster aesthetic to something more preppy. But apparently it isn't moving fast enough.