The future of American retailer American Apparel was thrown into doubt as it warned over its ability to continue as a going concern.
American Apparel expects to make a second quarter loss of between $5m and $7m and cautioned that it may not have “sufficient liquidity” to continue operating for the next year.
The retailer is in talks with its lenders after recognising the likelihood it would breach covenants as early as September 30.
American Apparel’s second quarter sales are expected to have dropped from $136.1m (£87.2m) last year to between $132m (£84.6m) to $134m (£85.9m) and like-for-like store sales to have fallen by 16%.
Reporting of the the retailer’s results to the US stock exchange had been delayed because of a change in auditor and the new auditor’s need for more time to put the second quarter figures in order.
UK backer Lion Capital is said to be considering its options.
In March Lion agreed a $80m (£50m) loan to American Apparel. The loan terms had to be renegotiated in June after the retailer struggled to stay within its covenants.