American Apparel plans to shutter some stores and lay off some of its staff as part of the next phase of its strategic turnaround, but warns there's still a chance it will run out of money.
The U.S. retailer expects the new cost-cutting measures will save $30 million over the next 18 months. It did not say how many of its 239 stores or 10,000 employees would be affected, but said the cuts were necessary in today's highly competitive and promotional retail environment.
In a statement, the company said "even if American Apparel increases revenue and cuts costs, there can be no guarantee that the company will have sufficient financing commitments to meet funding requirements for the next 12 months."
"We are committed to turning this company around," said Paula Schneider, the newly appointed CEO. "Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years."
American Apparel has accumulated more than $300 million in losses since 2010, mostly under the leadership of the retailer's controversial founder and former CEO Dov Charney, who was born in Montreal. He was ousted from the role last year amid allegations of sexual misconduct and misuse of funds.
In Monday's statement, the company said it also needs the extra cash to defend itself against approximately 20 lawsuits and administrative actions initiated by Charney.
The company added it will, for the first time, unveil a new fall line, and announced the appointment of two executives in its retail and wholesale divisions to help with the turnaround.