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Aéropostale Is the Latest Teen Retailer to File for Bankruptcy

An Aéropostale store. Photo: Roberto Machado Noa/Getty Images
An Aéropostale store. Photo: Roberto Machado Noa/Getty Images

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While Abercrombie & Fitch seems to be making headway on its big turnaround plan and American Eagle's Aerie continues to nab headlines for its stance against retouching, fellow teen retailer Aéropostale has hit rock bottom. Like PacSun before it, the mall chain filed for Chapter 11 bankruptcy protection on Wednesday.

Aéropostale's sales have been tanking for a while now. In mid-March, it reported a 16 percent drop in revenue during the fourth quarter of fiscal 2015; for the full year, sales declined 18 percent from $1.8 billion to $1.5 billion. A month later, Aéropostale delisted from the New York Stock Exchange.

Chapter 11 of the Bankruptcy Code allows the debtor — in this case, Aéropostale — to reorganize its business in an effort to get back on its feet, so this isn't goodbye forever. To fund its operations for the time being, the brand has secured a $160 million loan from Crystal Financial LLC, and it's planning to close 154 stores as a cost-cutting measure, including all 41 of its Canadian locations. Aéropostale, which was founded by Macy's in the early '80s before getting sold off and eventually taken public, would also consider selling to a third-party buyer.

There's a bit of drama to this court document, though: Aéropostale is claiming that one of its main suppliers, MGF Sourcing, essentially forced it to file for Chapter 11 bankruptcy protection by demanding cash in advance terms. And MGF isn't some random entity: it's owned by Sycamore Partners, a private equity firm that loaned Aéropostale $150 million when its business hit the skids in 2014. Yeah. Though this dispute has been aired publicly over the last few months, it's clearly far from done.