Dov Charney is determined to maintain his grip on American Apparel even as the clothing chain’s finances deteriorate.
The chief executive of the struggling hipster clothier — which warned this week it may not be able to continue as a “going concern” amid continued losses — has resisted approaches from outside investors despite a worsening cash crunch, according to sources close to the situation.
Despite on-and-off discussions with bigwig financiers like Ron Burkle, Charney “wants to wait it out and is hoping the situation improves,” one source close to the company told The Post.
That’s not just because Charney is reluctant to dilute his 53-percent majority equity stake in American Apparel.
Given the retailer’s depressed results and widely recognized brand, “you could say the stock is way undervalued and a lot of people are interested,” according to the source.
Yesterday, American Apparel shares sank by a penny to 98 cents a share — well below June levels, when Los Angeles billionaire Burkle shelled out $5.9 million to buy 4.3 million shares for a 6 percent stake in the firm.
While a throng of potential investing partners has been waiting in the wings for Charney, the outlook for the company is “complicated,” the source said.
An immigration crackdown at the company’s Los Angeles factory has sapped efficiency, and skyrocketing cotton prices threaten to squeeze margins even further.
In a long-delayed securities filing late Monday, American Apparel said it lost $57.5 million in the first six months of the year and that it expects the bleeding to continue at least through the third quarter that just ended.
American Apparel added that it “may not have sufficient liquidity necessary to sustain operations for the next 12 months,” and said it is negotiating with lenders to avoid potential defaults on credit agreements.
“Covenants aren’t the issue,” according to one financial source, adding that the more fundamental problem is that “cash is tight.”
Some industry insiders fret that Charney’s controlling tendencies are taking a toll on operations as well.
Last month, the company hired former Blockbuster CFO Tom Casey as its new president.
Apart from being unable to save Blockbuster from Chapter 11, Casey is “basically a banker type, and what they really need is a retailer,” according to one industry source close to the company.