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American Apparel

(APP) - Get AppLovin Corp. Class A Report

might be considering putting itself up for sale as it teeters on the brink of bankruptcy.

According to peHub, the t-shirt retailer is exploring a possible sale as it grapples with a lagging share price and persistent financial problems.

Shares of the embattled retailer surged nearly 7% in morning trading to 88 cents a share.

American Apparel warned last week that it might have to file for bankruptcy, after it reported a loss of $84 million in 2010.

"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."

The company said it expects to report a loss from operations and generate negative cash flows in 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.

American Apparel has been grappling with severe operating issues. Under the scrutinizing eye of Wall Street, the company hired a new chief financial officer in February in the face of a prolonged sales decline. The company's problems have ranged from a possible covenant breach to immigration probes and charges from its accountant that it withheld vital information.

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According to peHub, if the company is sold it is unlikely the buyers will allow CEO Dov Charney to remain at the helm. The eccentric chief executive has been in the spotlight in recent months after being

accused in two back-to-back sexual assaults


--Written by Jeanine Poggi in New York.

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