Aeropostale has been gearing for bankruptcy for some time as tanked sales and shares never turned around, but now the filing could come as soon as this week and a host of stores will fall victim in the fray.
The teen retailer is expected to file for Chapter 11 ahead of the due date for May rent payments and close more than 100 of its 800 stores, The Wall Street Journal reported, citing people familiar with the matter. Talks are reportedly underway with specialty lender Crystal Financial on a loan to finance its bankruptcy operations.
Retailers—especially specialty purveyors of teen gear—have been falling like dominos in the face of fast fashion competition from stores like H&M. Pacific Sunwear, the California-style teen retailer, filed for bankruptcy less than a month ago, Wet Seal gave in last year, and Quicksilver tapped Chapter 11 for aid too.
Aeropostale has posted losses for the last three fiscal years, and in its fiscal 2015 report, net sales were down 18 percent to $1.51 billion from $1.84 billion the prior year. Comparable sales were down 8.6% compared to an 11.1% drop in the previous period. Net losses for the year totaled $136.9 million.
Adding to the year’s subpar performance, Aeropostale found itself in a vendor dispute with MGF Sourcing, which started demanding the retailer pay up front rather than in 60-days time. Aeropostale argued that this was a breach of its 10-year contract with the company and said the move disrupted the supply of some of its merchandise. MGF said it didn’t violate the contract.
“The business trend has improved significantly since we introduced our spring merchandise assortments and launched our factory store initiative,” Aeropostale CEO Julian R. Geiger said when the report was released in March. “Under normal conditions, we would be very optimistic about our potential for financial growth throughout the first half of 2016. Regrettably, our short-term visibility is limited by our current vendor dispute.”
Aeropostale’s store closures are expected to closely follow the bankruptcy filing, and sources told the Journal that retailer plans to reorganize around its remaining stores, but further details of the restructuring plan aren’t yet clear.