American Apparel Plunges After Deloitte Resigns as Retailer's Accountant
American Apparel Inc., the Los Angeles-based retailer with more than 280 clothing stores, fell as much as 25 percent in New York trading after saying Deloitte & Touche LLP resigned as its accountant.
Deloitte has notified American Apparel that its financial statements for 2009 may not be reliable, the retailer said in a regulatory filing yesterday. American Apparel and Deloitte had no disagreements, according to the filing.
American Apparel, led by Chairman and Chief Executive Officer Dov Charney, appointed Deloitte as its auditor in April 2009. The retailer has reported two consecutive years of declining profit and repeatedly missed deadlines to file results with the U.S. Securities and Exchange Commission.
“The company has struggled since its IPO with both its internal controls and its ability to file SEC filings on a timely basis,” Ed Yruma, an analyst at KeyBanc Capital Markets Inc. in New York, said in a note to clients. He cited seven late filings since 2008. “An ability to file SEC filings on a timely basis has been an ongoing issue.”
American Apparel dropped 34 cents, or 19 percent, to $1.47 at 10:16 a.m. on the NYSE Amex after falling as low as $1.35. The shares had lost 42 percent this year before today.
Yruma downgraded the stock to “not rated” from “buy” and said a resolution to the company’s reporting issues may take time.
“Given the high degree of uncertainty we are unable to provide an investment opinion and step to the sidelines,” Yruma said.
American Apparel reported preliminary first-quarter results for the three months ended March 31 and said it would file a formal report after reviewing certain items. The retailer risks being delisted from the NYSE Amex if it does not file its Form 10-Q by Aug. 16.
The retailer’s audit committee hired Marcum LLP to go through the company’s financial statements. Marcum, formerly known as Marcum & Kliegman LLP, served as American Apparel’s accounting firm before Deloitte took over last year.
To contact the reporter on this story: Allison Abell Schwartz in New York at aabell@bloomberg.net
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