Struggling teen apparel retailer Aeropostale Inc. filed for bankruptcy protection recently, succumbing to years of losses as shoppers moved on to fast-fashion retailers and online competitors. According to Aeropostale, it plans to finance its operations during its bankruptcy through a $160 million loan from Crystal Financial LLC combined with operating cash flow, as per the court filing. The company expects to emerge out of bankruptcy within six months with a resolution of its disputes with former shareholder Sycamore Partners, which had thrown a lifeline of $150 million to the retailer in 2014.
The mall-based retailer said it would close 113 US stores and all 41 stores in Canada. The difficult market for teen apparel has triggered bankruptcy filings by high-profile retailers such as American Apparel Inc, Quiksilver Inc and Sports Authority Inc in the past year.
Online retailers and fast-fashion retailers such as H&M, Forever 21 and Inditex's Zara have posed a threat to traditional apparel retailers, but American Eagle Outfitters Inc and Abercrombie & Fitch Co have managed to turn around their businesses by controlling inventories and responding faster to changing fashion trends. Aeropostale said in March it was exploring strategic alternatives, including a sale, citing a dispute with a vendor, MGF Sourcing US, an affiliate of Sycamore Partners.