NEW YORK (AP) – Aeropostale Inc., once a popular mall destination for teens, has filed for Chapter 11 bankruptcy protection, becoming the latest victim in the fast-changing retail landscape.
Aeropostale joins the ranks of teen retailers looking to reorganize under bankruptcy protection or have been forced to close over the past two years, including Wet Seal Inc., Pacific Sunwear of California and Delia’s. And like many of these ailing merchants, Aeropostale had been struggling for several years. The chain, which generated sales of $1.51 billion last year, has racked up three years of annual losses and five straight years of annual sales declines for a key measure.
Since the Great Recession, many teen chains have suffered because of fierce competition from the likes of online players and fast-fashion retailers such as Forever 21. But they’re also wrestling with seismic changes in shopping behavior. Teens have always been fickle shoppers, but these days they’re shopping differently, mirroring broader trends in the retail industry. They’re no longer roaming around at the mall but researching deals and fashions on the Web before they go. And they’re not looking to be carbon copies of their peers; instead, they’re embracing individualistic styles.
Aeropostale was a bright spot during the downturn, as shoppers saw it as the cheapest option compared to the two other teen industry stalwarts: American Eagle Outfitters Inc. and Abercrombie & Fitch Co. But as the economy improved, teens went back to more expensive brands, though they still wanted fat discounts. Both American Eagle and Abercrombie have seen their sales improve recently as they have worked hard to reinvent their businesses. American Eagle, for example, has been able to scale back its discounting as it overhauled its fashions, including adding more stretch to its jeans. But Aeropostale has been slow to adapt to these changing times.
“It has become increasingly clear that Aeropostale’s business model is broken and cannot be fixed without major restructuring,” writes Neil Saunders, CEO of retail research firm Conlumino in a report published Wednesday. “In short, Chapter 11 buys Aeropostale time and space to undertake this rethink.”