American Apparel, the hip clothing company built by flashy Montreal native Dov Charney, may be on its last legs. With the company’s shares tanking and regulators raising questions about its bookkeeping practices, American Apparel said this week its ability to stay afloat is a “going concern,” suggesting it could soon file for bankruptcy protection. Sales at the L.A.-based retailer’s stores have seen double-digit drops over the past two quarters and American Apparel was carrying $120-million in debt as of June 30. Analysts speculate bringing the company back from the brink of collapse may very well require putting Charney out to pasture. “I would not be at all surprised if it was recapitalized and came back on the other side as a smaller, more focused company,” says Craig Johnson, president of Customer Growth Partners, adding “the changes could best be implemented under new management.”
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