American Apparel Sinks to New Low

American Apparel shares hit a new year low after it reports a wider first-quarter loss and says it may not be in compliance with a covenant under its credit agreement.
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NEW YORK (

TheStreet

) --

American Apparel

(APP) - Get Report

shares sank to a new 52-week low Wednesday after the retailer with the controversial ads said it received a delisting warning, may not be in compliance with a covenant under its credit agreement, and widened its first-quarter loss.

The projected covenant non-compliance may impact the company's ability to carry out its operating plan for 2010, American Apparel said in a statement. The company is working with its second-lien lender to obtain amendments to the total-debt-to-adjusted-EBITDA covenant at June 30.

The

New York Stock Exchange

also warned American Apparel that it must submit a plan to return to compliance by June 1, and must achieve that compliance no later than Aug. 16 or face a delisting of its stock.

Shares of the maker and seller of hipster T-shirts and other cotton leisure wear were plunging 25.2% to a new low of $2.01 in morning trading Wednesday.

American Apparel said its preliminary first-quarter loss widened to $17.6 million from a loss of $3.9 million in the year-ago period.

Sales grew 6.6% to $121.8 million, but same-store sales tanked 10%.

The company refrained from providing guidance, due to its "highly uncertain sales trends."

American Apparel's total debt increased to $91.4 million from $83.4 million in the fourth quarter.

Reported by Jeanine Poggi in New York.

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