Earlier this month, clothing retailer Aeropostale filed for Chapter 11 bankruptcy. Aeropostale has also announced that it will be closing 113 stores in the United States, as well as all of its 41 stores in Canada. The retailer wants to use its bankruptcy to restructure its business and reduce its debt. It plans to stay in business but the company will likely be sold.
Sales on the Decline
Aeropostale’s sales have been on a steady decline recently, with sales falling 18% last year. In March, the company said it expected to have a loss between $24 million and $29 million in the first quarter of this year alone. Aeropostale has about 14,500 employees in all 50 states, Puerto Rico, and Canada. Aeropostale reported that it has secured $160 million in financing in order to keep its doors open and pay its employees while it navigates through the bankruptcy.
Ongoing Legal Dispute
In addition to falling sales, Aeropostale has had an ongoing dispute with ones of its major shareholders, Sycamore Partners. Aeropostale entered into a deal with Sycamore that would require that Aeropostale have a supply chain agreement with apparel manufacturer MGF Sourcing US, a company owned by Sycamore. The relationship between Aeropostale, Sycamore, and MGF crumbled. Aeropostale claimed in its bankruptcy filing that MGF was demanding new payment terms and that it was threatening not to send goods to the retailer. Aeropostale’s CEO, Julian Geiger blamed the bankruptcy on this dispute: ‘‘The ripple effects of an ongoing dispute with our second-largest supplier put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans,’’ he said in a company release. ‘‘As a result, 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.’’
It has recently been reported that Aeropostale has entered into a proposed settlement with MGF. The settlement would allow the retailer to receive the recently ordered goods from MGF, and would provide for MGF to be paid within 14 days of delivery. Once the goods are delivered and payments are made, the two companies will terminate their rocky relationship. The bankruptcy court will have to approve this agreement, but if it does its will be good news for Aeropostale.
Aeropostale plans to restructure their finances and come out of bankruptcy less burdened by debts. If you need help restructuring your finances, please call one of our locations nearest you. Our experienced attorneys can help you find a solution to your financial problems.
Kathryn Davis is an attorney at the Bond & Botes Law Offices in Huntsville and Decatur, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from Samford University, Cumberland School of Law. She is passionate about utilizing the bankruptcy process to help clients navigate through what is usually some of the lowest points in their lives. Read her full bio here.