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Racy fashion brand American Apparel on the brink of closure

Racy  fashion brand American Apparel may soon need to shut all its stores.

Earlier this week, the company announced that its net sales for the second quarter of 2015 decreased 17.2% to US$134.4 million from US$162.4 million for the same period in 2014.

American Apparel said that the “decline in comparable sales was attributable to the lack of new style introduction for the spring and summer selling season”.

The company also announced the next phase of its strategic turnaround plan, which includes an approximate US$30 million in cost-cutting initiatives over the next 18 months. However, it also noted that together with its current expectations and projections for the next four fiscal quarters, it may not have “sufficient liquidity necessary to sustain operations” for the next twelve months.

Several global media reports have indicated that the cost cutting measures would include the lay off of its staff and closure of stores.

“These factors, among others, raise substantial doubt that we may be able to continue as a going concern,” said the American Apparel press statement.

It comes as no surprise, as the brand has been struggling over the past few years. Late last year, Dov Charney president and CEO for the brand was ousted and is currently in the midst of a messy lawsuit with the company. The brand since then has made several changes to its leadership team including hiring Paula Schneider as CEO.

Earlier this year, Schneider, in a bid to move away from Charney’s scandalised image, also made promises to put aside the brand’s “overtly sexual” advertising strategy to focus on social issues such as gay rights and anti-bullying. However, she was quick to add that this would not mean the end of being edgy for the brand which is what she said was part of its core DNA.

“Consumers today are fickle, but American Apparel has remained relevant. This is because of its core values. We will continue to be creative and will continue to be bold when relating to the consumers. The essence of American apparel will remain the same as with our commitment to an innovative marketing programme which shares iconic unique branding messages.”

In a conference call with the media at the start of the year, Schneider also outlined several of the brand’s priorities to build the business strategy and increase shareholder value. She also explained the brand would be committing to investing more into the marketing and business strategies by bringing more experience-based marketing to consumers on both online and brick and mortar store platforms.

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