Aéropostale Bounces Back From The Brink Of Destruction

While Christmas is the holiday best known for miracles, every once and a while, a new player takes the stage. Aéropostale, for example, got its miracle for Labor Day.

But the source is probably less important than the outcome — which is narrowly avoiding liquidation.

Instead, landlords Simon Property Group and General Growth Properties, liquidators Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC and licensing firm Authentic Brands Group have won ownership of the struggling retail chain with a joint offer of $243.3 million.

That was enough to battle back a rival bid from Sycamore Partners, the firm’s current stakeholder. Had Sycamore prevailed, it would have liquidated the chain.

The drama is not quite over yet — a bankruptcy court must sign off on the agreement, with a hearing scheduled for Sept. 12.

If that hearing goes the way it is widely expected to, the teen retailer will continue to operate a much smaller footprint of stores — 229 — while the remaining inventory from hundreds of stores to be shut down will be sold off.

Aéropostale said in a statement on Friday (Sept. 2) that it’s back “with new ownership as a financially stronger company positioned to compete and succeed in an evolving retail landscape.”

This may mark the end of one of retail’s more dynamic sagas. Aéropostale has been at odds with Sycamore since selling a major stake to the group in 2014. That deal included an agreement to source merchandise with Sycamore-owned clothing manufacturer and supply chain management company MGF. Aéropostale has long contended that Sycamore and MGF conspired to essentially gaslight the company into bankruptcy.

Sycamore has long since maintained that mismanagement was Aéropostale’s problem — though its tone was conciliatory on the announcement.

“We are pleased with the outcome of the Aéropostale Inc. bankruptcy auction, which will result in the repayment of our debt, while enabling the company to keep open more than 200 stores, preserve thousands of jobs and continue to serve customers,” a Sycamore spokesperson told Bloomberg.

The drastically slimmed-down Aéropostale still must make the changes it has failed to accomplish so far and shift away from logo-centric clothing that is no longer in fashion. The retailer must also reconcile its purported customer base with the shoppers who actually buy its clothing: While Aéropostale features older teens in its marketing, it tends to sell to tweens or, more accurately, their parents.

Yet another obstacle: Aéropostale has consistently produced high-quality clothing but also featured barrel-bottom prices, an unsustainable drag on its margins.

“Today, Aéro is all about price. They have this kind of junior customer who’s not quite a fast-fashion customer, where Mom’s the real shopper, taking the 11-year-old into the store. So, if that trend is off or too sexy for this kid, Mom’s not going to be buying that,” Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext, told Retail Dive earlier this year. “I think they’re missing the trend for that market.”



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