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American Apparel asks for restructuring advice

Thursday, 20 Feb 2014 | 6:07 PM ET

Clothing and accessories retailer American Apparel has tapped restructuring advisers after being bogged down by weakening sales and heavy debt, the Wall Street Journal reported, citing people familiar with the matter.

An American Apparel retail store in Washington, D.C.
Saul Loeb | AFP | Getty Images
An American Apparel retail store in Washington, D.C.

The company recently enlisted lawyers at Skadden, Arps, Slate Meagher & Flom to work on restructuring options, though it is unclear what the strategy will be, the paper said.

The company, known for its racy advertising and bright "Made-In-America" clothes, reported that January same-store sales fell 5 percent while total sales fell 1 percent due to a colder-than-usual weather in the United States.

Following the report, American Apparel shares lost 32 percent in trade on Thursday. (Click here to track its stock in extended trade.)

(Read more: Lululemon shares up: A downward dog no more?)

The Los-Angeles-based company has about $240 million in debt and has come close to breaching loan covenants, debt terms designed to protect its lenders, in recent quarters, the Journal reported.

Spring clothes: The key to boosting retail sales?
Ted Potrikus, executive vice president of Retail Council of New York, says some shops are selling spring clothes despite snowy U.S. conditions, which reminds customers that "warmer days are coming".

Some of the company's bondholders are starting to organize and are reaching out to restructuring advisers, according to the report.

American Apparel and Skadden could not immediately be reached for comment.

(Read more: Gap to raise minimum wage; Wal-Mart still 'neutral')

—By Reuters

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