Aéropostale has filed for bankruptcy protection this week for its waning sales among the teenage demographic. The rise of online competitors and fast fashion retailers has overtaken Aéropostale's once strong hold on teen apparel.
Established in the early 1980s, the company has lost money for 13 successive quarters, and is on the verge of closing 113 stores in the United States and 41 stories in Canada, CNN reported. Aéropostale said it expects its bankruptcy to end within six months after restructuring and renegotiations of difficult contracts.
It also aims to resolve a disagreement with Sycamore Partners, a former investor in the firm. Sycamore Partners lent $150 million to Aéropostale back in 2014, according to Reuters.
A total of $354 million was indicated by Aéropostale in its Chapter 11 filing while Crystal Financial LLC will finance $160 million to the retailer. Aéropostale's entire debt cost is at $390 million.
The Reason Behind Aéropostale's Downfall
In the most recent quarter, Aéropostale's sales have dropped to 16 percent despite offering big discounts to consumers, CNN reported. Last month, the company was delisted by the New York Stock Exchange because of its plummeting trading price. Aéropostale first made its debut in the stock market in 2002.
The fast fashion trend practiced by H&M, Forever 21 and Zara has greatly contributed not just to the downfall of Aéropostale, but also of older clothing brands like American Apparel and Banana Republic, Reuters wrote. Other old brands, however, such as American Eagle Outfitters and Abercrombie & Fitch have adapted to the fast fashion trend and controlled their inventories to save their companies.
David Dick, Aéropostale's chief financial officer, said the company earned big profits in the last 30 years. It lost money when teenagers started going to the mall less often and they began to set their sights towards technology and personal experiences instead of clothing. Dick added that the retail environment for teenagers is highly competitive, BuzzFeed reported.
Aéropostale Owes Hundreds Of Thousands To Bethany Mota
Among the companies and people Aéropostale owes money to is YouTube personality Bethany Mota, The firm owes $500,000 to Mota, an amount higher than what it owes to big shopping centers such as Taubman and General Growth Properties.
Mota -- who has 10 million subscribers on her YouTube channel, five million Instagram followers and 2.5 Twitter followers -- launched her first clothing collection for Aéropostale in December 2013. She released her final collection in April 2016.
