After months of uncertainty and worries about liquidation that have loomed since filing for bankruptcy in May, Aéropostale has fought to live another day.
A consortium of companies, including mall operators Simon Property Group and General Property Group, licensing firm Authentic Brands Group and liquidators Gordon Brothers and Hilco Merchant Resources, placed a $243.3 million winning bid in a bankruptcy auction for the teen apparel retailer, giving the brand a second life.
Under the consortium’s control, Aéropostale would save as many as 229 of the approximately 800 stores it operated at the time of the filing, in addition to its e-Commerce international licensing businesses. The news is a breath of fresh air for the retail industry, especially in a year when longtime sporting goods leader Sports Authority shuttered all its stores and brands such as Hancock Fabrics and Sport Chalet have shut down entirely.
While Aéropostaleis getting a second chance, albeit on a much smaller scale, the retailer still must take significant steps to rebound from its recent financial struggles. Aéropostale initially succumbed to many of the same problems its fellow mall-based teen brands have had to combat, including the emergence of cheaper fast fashion competitors, an overabundance of redundant stores, a lack of e-Commerce engagement and a general decline in mall traffic. Now that the retailer has been forced to reduce its physical footprint, it can — and has to — remain focused on the merchandise repositioning it started in May 2016, in order to get quicker turnarounds on its products and remain relevant in the eyes of potential consumers.
A Manhattan bankruptcy judge must still approve the deal after reviewing the terms and any objections. A hearing on the matter has been set for Sept. 12.
According to a statement issued by the retailer, “Aéropostale looks forward to closing the sale and emerging from bankruptcy with new ownership as a financially stronger company positioned to compete and succeed in an evolving retail landscape.”
The auction’s closing also ends a scuffle between Aéropostale and its lender, private equity firm Sycamore Partners. The retailer alleged that the venture capital firm’s partner, clothing supplier MGF Sourcing, deliberately disrupted the flow of its merchandise supply and imposed stricter payment terms, causing liquidity and inventory problems bankruptcy.
As a result of the auction, Aéropostale will repay a $150 million credit debt to Sycamore Partners that stems from a loan in 2014, when the retailer first sought to reorganize.