Persistent LossesTwo consecutive years of negative EBIT and net income erode retained earnings and limit internal financing capacity. Persistently unprofitable operations strain long-term viability, hinder reinvestment into product or process improvements, and increase dependence on external funding.
Negative Operating & Free Cash FlowChronic negative operating and free cash flow create liquidity pressure and reduce the firm's ability to fund working capital and capex from operations. Over months this raises refinancing and rollover risk and can force asset sales, credit covenant strain, or higher-cost borrowing.
Rising LeverageAn increasing debt burden heightens interest and principal repayment obligations, compressing cash available for operations. If margins and cash generation don't improve, rising leverage constrains strategic choices, raises default risk, and can accelerate distress in a cyclical apparel market.