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American Apparel (NYSEMKT:APP) shares plummeted on Friday after announcing that it may have to file for Chapter 11 bankruptcy protection unless it can find a way to improve its sales and cash position.

The beleaguered global apparel retailer also posted disappointing fourth quarter and full-year results today, suffering from a weak retail environment, higher production costs and late deliveries on account of labor disruptions.

For the fourth quarter ending December 31, the Los Angeles-based company reported a net loss of $19.3 million, or $0.27 per diluted share, compared to a profit of $3.0 million, or $0.04 per diluted share, in the year-ago period. Meanwhile, revenue during the period fell nearly 9% year-over-year to $144.0 million, with total retail sales falling just over 10%. Wholesales sales dropped 6%, while online consumer sales shrunk by 4.4%. Comparable store sales, or sales for stores open at least 12 months, declined 11.5% from a year earlier, on a constant currency basis.

"We suffered the after-effects of a major labor disruption resulting from an immigration intervention in 2009. The disruption of our 2010 production schedule resulted in significantly higher production costs per unit and late deliveries of products to our stores and to our wholesale clients," said acting president Tom Casey. "In addition, we encountered extraordinarily challenging world-wide economic conditions. We also experienced higher yarn and fabric costs in the second half of 2010."

Operating expenses for the fourth quarter were $92.0 million, up from $77.6 million in the prior year period. The company said the increase was partially due to lease termination costs, relating to the closure of some of its less-profitable stores.

Full-year results were also weak, as the retailer reported a net loss of a whopping $86.3 million, or $1.21 per diluted share, compared to net income of $1.1 million, or $0.01 per diluted share, in 2009. Revenue fell 4.6% to $533.0 million from $558.8 million a year earlier.

Last October, the company amended a loan agreement with Lion Capital to give the company more flexibility to meet its debts. At year-end, it had $213.2 million in current liabilities. American Apparel ended the year with 273 stores, having to close eight in 2010.

The company said it expects to incur a loss from operations and generate negative cash flows in fiscal 2011, leaving it with "substantial doubt that the company will be able to continue as a going concern."

"In addition, the company could be prevented from borrowing under its revolving credit agreements and this could have an immediate and significant impact on its liquidity," American Apparel said in its statement.

Shares of the brand fell nearly 15% on Friday to $0.82 as of 2:51pm EST.

Source: American Apparel Pounded by Possible Bankruptcy