Struggling teen retailer Aéropostale filed for bankruptcy protection on Wednesday to shed debt and streamline its operations after falling out of favor with young shoppers.
The company, which currently has about 800 stores, will close 113 locations in the U.S. and 41 locations in Canada. While in Chapter 11, it will also continue to look for a buyer.
Even though restructuring initiatives have “started to gain traction,” CEO Julian Geiger said in a news release, “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.”
In court papers, Aéropostale said declining mall traffic, a highly promotional and competitive teen retail environment, and “a shift in customer demand away from apparel to technology and personal experiences” had all contributed to its declining financial performance.
Aéropostale’s sales have been falling drastically in recent years, declining 18% in 2015. In March, it said it expected to have a loss between $24 million and $29 million in the first quarter this year.
But CFO David Dick also blamed the company’s troubles on private-equity firm Sycamore Partners, its largest lender and the owner of one of its largest suppliers. Earlier this year, the supplier, MGF, demanded Aéropostale pay for goods in advance instead of after delivery.
“It has become increasingly clear to me over the course of the last several weeks since Sycamore and MGF first demanded cash in advance terms … that Sycamore was using its leverage over MGF to precipitate the [bankruptcy] filing,” Dick said in the court papers.
The Wall Street Journal reported that Sycamore has moved to block Aéropostale’s $160 million bankruptcy loan deal with Crystal Financial. Its lawyers said the company’s survival strategy was “an illusory, yet-to-be-formulated reorganization and/or Hail Mary and lengthy going-concern sale process that has no realistic chance of success.”
Neil Saunders, CEO of retail analytics firm Conlumino, said Chapter 11 would be only a temporary fix for Aéropostale. “It buys them some breathing space,” he told USA Today. “What it needs really is a brand reinvention.”