Aeropostale files Chapter 11; store closings include exit from Canada
In a move rumored for weeks, Aéropostale on Wednesday filed for Chapter 11 bankruptcy protection.
The struggling teen apparel retailer said it would close 113 stores in the United States and all 41 of its stores in Canada. Store closing sales in the United States will begin this weekend (May 7-8), and in Canada during the week of May 9.
The chain also left itself open to shuttering additional U.S. stores, saying that it is reviewing its leases and other contracts “to ensure they are competitive with current market dynamics.” (As of May 1, Aeropostale operated 739 namesake stores nationwide and in Puerto Rico and 25 P.S. from Aeropostale stores.)
Aeropostale said it expects to emerge from bankruptcy within six months, coming out with a smaller store fleet increased efficiencies and reduced expenses.
In its filing, the chain asked the court for permission to investigate its largest secured creditor, Sycamore Partners, saying Sycamore used a supplier it controls — MGF Sourcing — to help drive it into bankruptcy.
“While our merchandise repositioning have started to gain traction, the ripple effects of an ongoing dispute with our second-largest supplier put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans,” stated Aeropostale CEO Julian Geiger. "As a result, we have chosen to take more decisive and aggressive action to create a leaner, more efficient business that is well-positioned to compete and succeed in today's retail environment."
Sycamore has denied the allegations.
The retailer, which listed $354 million in assets and $390 million in debts in its filing, has secured $160 million in bankruptcy financing from Crystal Financial LLC to keep its stores open and continue paying employees while it goes through the bankruptcy process.
Aeropostale has recorded three consecutive years of losses as its struggles to deal with a teen audience whose spending tastes now favor fast-fashion giants such as H&M as well as online retailers.
In March, the retailer announced plans to evaluate strategic alternatives, including a sale of the company.
On April 22, the New York Stock Exchange suspended trading of the company’s stock with immediate effect, due to an "abnormally low" trading price. Aeropostale did not appeal the delisting, and said its shares will instead be traded on the OTCQX Best Market, an over-the-counter market operated by OTC Markets Group Inc.
Aeropostale's bankruptcy filing follows the recent Chapter 11 filings of such other teen apparel retailers as Pacific Sun, Quiksilver, American Apparel and Wet Seal.