Despite Turnaround Attempts, Aeropostale Files for Chapter 11

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Aeropostale

Count Aeropostale among the growing number of bricks-and-mortar retailers to bite the dust. The once-popular young-teen brand that was originally founded by Macy’s has filed for Chapter 11 bankruptcy protection.

The  New York-based brand had been scaling back for a couple of years by closing stores, and its last-ditch attempt at relevance was its tie-up with YouTube fashionista Bethany Mota that began in 2014. But even her fresh designs and personal appeal as a social media and pop culture star weren’t enough to rescue Aeropostale from the fickle tastes of middle-school girls—and the crushing effects of the digital arena.

Comp-store sales for Aeropostale were down by 7 percent in the most recent quarter, and net sales were down by more than 16 percent. That followed a horrible fiscal 2015 in which comp-store sales were down by 9 percent.

“Its range does not resonate and has little relevance,” summed up Conlumino analyst Hakon Helgesen in a note to clients, according to Business Insider. “While consumer tastes have shifted, Aero has steadfastly clung to a range that looks more at home in the mid-2000s than 2016, and a store environment that all too often resembles a yard sale.”

Too, Aeropostale has been dragged down by a dispute with a major supplier, MGF Sourcing, which is owned by private-equity lender Sycamore Partners.

“While initiatives such as the implementation of our two-chain Factory and Mall strategy and our merchandise repositioning have started to gain traction,” Aeropostale CEO Julian Geiger said in a press release, “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.” Sycamore denied the allegations, according to Bloomberg.

In any event, Aeropostale plans to close initially 154 stores in the US and Canada beginning this weekend. At the end of fiscal 2015, the company operated 811 stores, and it currently has 14,500 employees according to court records, Bloomberg said.

The company said Aeropostale hopes to “emerge from the Chapter 11 process within the next six months as a standalone enterprise with a smaller store base, increased operating efficiencies” and reduced expenses. Any potential sale would come in the next six months.

It sure looks as though Aeropostale will take a path similar to recently failed retailers including American Apparel and Sports Authority. Or it could actually make a comeback attempt, similar to Quiksilver.

The Australia-founded Quiksilver was considered the top surfwear brand in the world and hit $2 billion in sales in the early 2000s, according to the Orange County Register. But a variety of moves brought the company into Chapter 11. Now it is trying to turn things around with new capital as it emerges from bankruptcy, and a new business plan established in part on opening a new chain of interactive surf shops called Boardriders.

Still, it’s hard to shake a checkered past. One thing the “new” Quiksilver must deal with is a lawsuit by professional surfer Dane Reynolds, who alleges that the company owes him $3.6 million from a sponsorship deal struck by the “old” Quiksilver. But this week Quiksilver said that Reynolds last year had agreed to give up all claims related to the deal.

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