That Aeropostale had to resort to bankruptcy reflects some big-picture challenges in retailing. Many of the chain’s stores are located in the kinds of smaller, regional malls that have experienced plummeting foot traffic due to the rise of online shopping. And teen retailers that dominated high-school dressing trends in the 90s and early aughts generally have struggled to adapt to the preferences of today’s young shoppers, who are instead flocking to fast-fashion outposts such as H&M and Zara. Fellow teen retailers Delia’s, Deb Stores and Wet Seal ended up filing for bankruptcy and closing their entire store fleets last year because they could not figure out how to court customers in this shopping environment.
And retail bankruptcies have hardly been limited to the teen-focused set: Sports Authority filed for bankruptcy in March and could end up closing all or some of its stores. Women’s evening wear retailer Cache filed for bankruptcy last year and closed all of its more than 200 locations.
Aeropostale had been trying desperately to reverse its mounting losses. In January, it had announced a strategic plan that included cutting 13 percent of its corporate workforce and implementing a cost-cutting program that it hoped would generate up to $40 million in savings. Since August 2014, it has installed a new chief executive and chief financial officer. And it tried to overhaul its merchandise by focusing on a customer it calls the “flirty tomboy girl.” The look is supposed to be more classic and less trendy than what the fast-fashion stores are hawking, and a clear departure from the logo-emblazoned looks that were once the chain’s bread and butter.
Despite all those efforts, Aeropostale still is in a tough spot. In its most recent earnings report, the company said total sales plunged 16 percent, and sales on its website and at stores open more than a year slipped nearly 7 percent. It recorded a net loss of $22 million, an even steeper loss than was seen in the same quarter last year.
Some of Aeropostale’s peers seem to doing a better job of navigating choppy retailing waters. Abercrombie & Fitch, the epitome of logo-heavy fashion, experienced its own stumbles. And yet recently, it surprised Wall Street in the holiday quarter by posting its first increase in same-store sales in over three years. American Eagle Outfitters, too, has also seen improved sales recently.
“The majority of the blame for poor performance lies squarely with [Aeropostale’s] failure to realign itself to the changing fashion demands of younger shoppers,” said Neil Saunders, chief executive of the retail analytics firm Conlumino, in a research note. “Against this backdrop Aero has a brand and range that is ill-defined, somewhat dull, and rather out of tune with modern tastes.”
Aeropostale said in a statement that it intends to “emerge from the Chapter 11 process within the next six months as a standalone enterprise with a smaller store base.” If its plan is approved, the retailer will close 113 U.S. stores and all of its 41 stores in Canada.