Retail

Another One Goes Down: Aéropostale To File For Chapter 11

Another retailer seems poised to fall to the ongoing wave of retail bankruptcies that have been sweeping through the U.S. landscape.

Next up on the block, according to Wall Street Journal reports, is long suffering teen retailer Aéropostale.

The firm is also moving to close more than 100 stores, according to people familiar with the matter.

The filing comes a few days before May rent payments will come due – and the current exit strategy involves securing a loan from specialty lender Crystal Financial LLC to help the firm operate through bankruptcy proceedings.

The retailer would close more than 100 of its roughly 800 stores soon after filing and potentially more later, the people said. Those stores that are left will be reorganized, though the exact shape of that remains to be seen.

Aéropostale was initially developed as a private label brand for Macy’s Inc in the ’80s, but the brand went independent and rode T-shirts, jeans and simplified teen fashion items to a valuation of $3 billion in 2010.

But the last three fiscal years have not been kind, and the retailer has posted losses amid a steep decline in sales, leaving its market value at a greatly degraded $2.9 million, according to FactSet. Making matters worse, the brand’s main clothing manufacturer, MGF Sourcing, started demanding its payment upfront rather than in a span of about 60 days.

Aéropostale accused MGF of breaching their 10-year agreement and causing a disruption in the supply of some merchandise in March, though did not offer details as to what exactly the violations might have been.

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