Is American Apparel Having Trouble Paying Its Bills?

American Apparel image
Source: courtesy of American Apparel image
As if the company is not having enough trouble, American Apparel Inc. (NYSEMKT: APP) appears to be having difficulty paying its bills. A report in the New York Post Wednesday morning said that the retailer has delayed payments to some vendors by up to 60 days. A spokesman for American Apparel told the Post that “liquidity is better than it has been in a very long time.”

The post cites lawyers for the firms that finance shipments of raw materials like fabric and yarn to American Apparel:

[The financing firms] keep reducing the amount of availability to manufacturers and vendors to American Apparel. They don’t want to take the receivables because American Apparel’s not paying their bills [on time].

The company’s spokesman countered:

[American Apparel] has had great feedback from its vendors over the past two months about the progress it has made improving the accounts payable function and they expect continued improvements in the weeks and months to come.

In its third-quarter financial report, the company noted that it had paid out $6.62 million for an internal investigation to oversee “the continuing investigation into the alleged misconduct of [former CEO Dov Charney]. The suspension and subsequent internal investigation have resulted in substantial legal and consulting fees.” The Post cites a source who said the company has spent $10 million “fighting the guy they ultimately fired.”

ALSO READ: Holiday Retail Winners and Losers

The company closed the third quarter with $9.4 million in cash, and there is little question that the $6.62 million it spent fighting with Charney could have been put to better use. The Post reported earlier this week that American Apparel is cutting hours for workers at its Los Angeles plant. That could imperil the firm’s ability to get new products to its stores, which will only make matters worse. The company said that it plans to reduce hours as it does every January after the busy holiday season is over.

American Apparel has adopted a poison pill to fight off attempts at a hostile takeover and has hired investment bank Moelis & Co. to help it evaluate any offers that may be forthcoming. Last week the company named a new board chairman and a new CEO, after it finally fired Charney.

The company’s stock traded down nearly 2% in Wednesday’s premarket session to $1.05, after closing on Tuesday at $1.07. The 52-week range is $0.46 to $1.45 a share.

ALSO READ: America’s Worst Run Companies

Sponsored: Find a Qualified Financial Advisor

Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.