Robbins Umeda LLP Announces an Investigation of American Apparel, Inc

Robbins Umeda LLP has commenced an investigation relating to American Apparel, Inc. (“American Apparel” or the “Company”) (AMEX: APP) in connection with possible violations of the state and federal securities laws.

American Apparel engages in the design, manufacture, and retail of fashion apparel for women, men, children, and pets.  The Company sells its products through retail and wholesale distribution channels, as well as through its online retail e-commerce website.  American Apparel was founded in 1998 and is headquartered in Los Angeles, California.

Robbins Umeda’s investigation concerns whether certain directors and officers made improper statements to inflate the Company’s stock price.  On March 31, 2010, American Apparel disclosed an audit report issued by Deloitte & Touche, LLP (“Deloitte”) which identified material weaknesses in the Company’s internal controls over financial reporting.  These weaknesses led to deficiencies in the analyzing and recording of certain inventory costs, cost of sales, and the preparation of account analyses, account summaries, and account reconciliations.  The Company also apparently did not perform adequate and independent reviews and maintain effective controls over the preparation of its financial statements.  As a result, there is an increased likelihood of “potential material errors to the [December 31, 2009] consolidated financial statements.”

On May 19, 2010, the Company announced its preliminary first quarter results stating that as a result of reduced operating income it anticipated covenant non-compliance beginning June 30, 2010.   American Apparel announced that based on the continued uncertainty regarding the reduced manufacturing efficiency being experienced at the Company’s production facilities and the impact that the projected covenant non-compliance may have on the Company’s ability to carry out its operating plan for 2010, American Apparel was deferring providing financial guidance for 2010.  As a result of this announcement, American Apparel’s stock price dropped from $2.74 to $1.63.

On July 22, 2010, Deloitte resigned as the independent registered public accounting firm of American Apparel, which was not announced to the public until July 29, 2010.  After Deloitte’s resignation was announced to the public, American Apparel shares promptly dropped from $1.81 per share to close at $1.55 per share, on abnormally high trading volume.  Finally, on August 16, 2010, American Apparel announced its preliminary second quarter results and again expressed its concerns over having enough liquidity to sustain itself another year.  American Apparel also announced that is had been subpoenaed by the U.S. Attorney’s Office for the Southern District of New York seeking documents related to its auditing practices.

On August 17, 2010, American Apparel’s stock closed at $1.03 per share, representing a 66.5% drop from the Company’s value on March 30, 2010, of $3.08.

If you purchased American Apparel common stock between January 1, 2008 and August 16, 2010 and would like more information regarding your rights as a shareholder, please contact Gregory E. Del Gaizo, Esq. of Robbins Umeda LLP, at 800-350-6003 or by e-mail at

    Send This Post