Struggling US fashion chain American Apparel like-for-likes dropped 16% over the third quarter to September 30.

Total sales fell 10% to $134.2m (£84m).

It also reported a decline in third-quarter gross margin from 58.1% in the same period last year to 52.2% this year, which it attributed to increased production costs, a shift in production to “more complex retail styles” and a greater reliance on wholesale.

The company is currently working with its primary lender, Lion Capital, in a bid to get the business back on track. Last month, it amended the terms of the chain’s loan agreement to prevent it from breaking its banking covenants.

Tom Casey, acting president of American Apparel, said: “We expect to improve financial results by supporting the brand with a customer-focused supply chain, leveraging our speed to market capability with lower distribution costs. We are optimising our retail store base through investment in technology and improved allocation while lowering our lease costs.”

American Apparel chairman, chief executive and founder, Dov Charney, added that it was working with Lion to develop a strategic plan, and added it was currently seeking to boost its executive team.

He added that the chain had seen reinvigorated interest in the brand and that it would look to drive sales of its basic ranges as it “aligns product design and development with more efficient manufacturing”.

Earlier this month American Apparel belatedly reported a second-quarter net loss of $14.7m (£9.1m) after sales fell 2.4% to $132.7m (£86m).