Clothing retailer Aeropostale is shuttering all its stores in Canada, as it files for Chapter 11 bankruptcy protection in the U.S.
The New York-based company said Wednesday it was closing all 41 locations across Canada and 113 locations in the U.S. The closures represent 20% of the retailer’s presence in North America. It will continue to operate 626 stores in the U.S.
Going-out-of-business sales will begin on May 9 at the Canadian locations, while sales at the U.S. stores will kick off this weekend. The company did not provide any details on how deep the discounts would be, or when the Canadian stores would ultimately close. It would not say how many jobs will be affected by its exit.
Retail consultant Maureen Atkinson said Aeropostale had faced stiff competition in Canada, vying for the same customers as other apparel retailers like H&M, Forever 21 and Old Navy.
“They’ve always been at the low end of the price segment,” said Atkinson, who is with J.C. Williams Group.
“They really weren’t great stores and they weren’t really compelling. They didn’t have a personality.”
Aeropostale, which targeted the teen fashionista, has suffered along with its competitors under a vastly altered consumer landscape that took root during the recession.
“Fast fashion” outfits, with more inexpensive clothes, have emerged in recent years to take a growing market share from Aeropostale, Abercrombie & Fitch and American Eagle Outfitters, stores that not so long ago dominated the retail sector.
Aeropostale expects to emerge from bankruptcy protection within six months as a smaller company after renegotiating contracts and resolving an ongoing dispute with the investment firm Sycamore Partners, a major shareholder that pushed through changes in company leadership.
In the filing, CEO Julian Geiger lashed out at Sycamore, which he accused of hampering the company’s turnaround plans.
“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 press 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.”
Once worth almost $2.6 billion, Aeropostale’s market capitalization has fallen to about $2 million.
The company’s shares traded for more than $30 six years ago, when annual sales exceeded $2 billion. Two weeks ago, it was delisted from the New York Stock Exchange with shares having failed to break the $1 barrier since last year. Shares on Wednesday were trading over the counter for less than 3 cents.
The company early this year said it would cut expenses by $35 million to $40 million annually and trimmed its corporate staff by 13% — about 100 jobs.
Aeropostale has secured a commitment for $160 million in debtor-in-possession financing from Crystal Financial, which will allow it to continue operations. It also filed a series of motions that would allow it to pay employees, as well as honour customer gift cards and pay suppliers, if approved by the court.