After accumulating losses for the past several years, Aeropostale has filed for Chapter 11 bankruptcy protection today. Aeropostale, which was once recognized as the leading teen retail brand, has seen interest diminish in its apparels as shoppers flock to other brands such as ZARA and H&M.
According to a recent report from Reuters, Aeropostale will finance its operations during its bankruptcy through a $160 million loan from Crystal Finance LLC along with its cash flow.
The company will close 113 stores in the U.S. and 41 stores in Canada, starting this weekend. There is a total of 800 stores.
CEO Julian Geiger said,
“We have chosen to take more decisive and aggressive action to create a leaner, a more efficient business that is well-positioned to compete and succeed in today’s retail environment.”
The company expects to come out of the bankruptcy proceedings in the next six months. A potential sale is also on the cards.
Aeropostale is not the only retailer feeling the brunt of shoppers’ disinterest. Leading brands such as Abercrombie and American Eagle are struggling to get the shoppers in their stores. PacSun, American Apparel, and Sports Authority have already filed for bankruptcy protection.
The downfall of Aeropostale is a perfect case-study of how fortunes can change with times. It also exemplifies what failing to keep up with customer expectations and preferences can do to a brand. Investors which loved the stock until just six years ago have been burnt badly as the stock price crashed from a peak of $32.24 to $0.15 as of April 21, 2016, when the company was delisted from the NYSE.
It is hard to say if we will see a new, leaner, and more efficient Aeropostale six months from now. The brand has lost the love of the teens, and the management will likely see some shakeup before they re-adjust their focus on the market.