Aéropostale Inc. Files for Chapter 11 Bankruptcy, Will Close 154 Stores
NEW YORK CITY — After losing money for 13 consecutive quarters, teen apparel retailer Aéropostale Inc. (OTCQX: AROP) has filed for Chapter 11 bankruptcy protection.
Aéropostale will close 113 U.S. locations, as well as all 41 stores in Canada, and could announce more store closures at a later date. Of the 154 stores closing, 117 lost money last year, and the rest generated little profit.
Store closing sales are scheduled to begin in the United States during the weekend of May 7-8, and in Canada during the week of May 9.
The company plans 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 SG&A [selling, general and administrative] expenses,” according to a press release from the company. Any sale of the company would be announced within the next six months.
“While initiatives such as the implementation of our two-chain Factory and Mall strategy and 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,” says Julian Geiger, CEO of Aéropostale.
“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,” adds Geiger.
Aéropostale will finance its operations during bankruptcy through a $160 million loan from Crystal Financial LLC along with operating cash flow.
The company has also filed a series of motions that, pending court approval, will allow it to pay employee wages and benefits without interruption, honor all gift cards in full, uphold the terms of its international licensing agreements and pay suppliers in the normal course of business.
Aéropostale’s is one of many companies to seek Chapter 11 protection during a bumpy two years for brick-and-mortar retailers. Others that have filed for bankruptcy over the last 18 months include RadioShack, Wet Seal, Quicksilver, American Apparel, Pacific Sunwear, Sports Authority and Vestis Retail, which operates the Sports Chalet, Eastern Mountain Sports and Bob’s Stores brands.
The New York Stock Exchange delisted Aéropostale’s stock in April. As of May 1, the company operated 739 stores in the United States, along with 25 locations of its P.S. from Aéropostale brand. Aéropostale listed assets of $354 million in the Chapter 11 filing, with debts totaling $390 million.
— Haisten Willis