After a rough 2015 in which it incurred a net loss of $136.9 million and experienced an 8.6% decrease in comparable store sales, Aéropostale is exploring strategic and financial alternatives, including a potential sale or internal restructuring.
Aéropostale, a specialty retailer traditionally targeting teens and young adults, isn’t the only merchant geared toward a younger audience having financial difficulties of late. Primary competitor Abercrombie & Fitch actually posted a 1% rise in comparable store sales in Q4 2015, but it was the first time in three years the retailer reported net quarterly growth.
Pacific Sunwear has reportedly hired financial advisors to help the company maneuver through $160 million in debt set to mature in 2016. If this is the case, the retailer will likely seek out strategic alternatives of its own, which also may include a Chapter 11 bankruptcy reorganization or a debt restructuring.
Additionally, retailers such as Cache, Wet Seal, Deb Shops and dEliA*s have all filed for bankruptcy within the past 18 months, giving credibility to the idea that there is a disconnect between these stores and the shoppers they want to cater to.
Given that these retailers all gear their offerings to the teenage demographic — otherwise known as Generation Z or the iGen — it is quite possible that they weren’t as up to speed on the e-Commerce and mobile experiences as they could have been. Unlike past generations, Gen Z has never been without Internet access or mobile phones, and therefore is more accustomed than older consumers to the idea of making purchases online instead of in the store.
This shift has certainly had an effect on in-store traffic at these retailers, particularly within shopping malls. Mall traffic by teen visitors declined 30% from 2004 to 2014, according to a recent survey from Piper Jaffray Cos. With shopping malls now serving as a less frequent destination for teenagers than they were the past, retailers are going to have to rethink their brick-and-mortar strategies going forward and decide whether having a hefty mall presence is worth the costs of rent, inventory and staffing these stores require.
Companies such as Aéropostale also have had to deal with the surging popularity of fast-fashion chains such as H&M and Zara, which are designed to provide value pricing for items that are in line with immediate fashion trends. This business model heavily aligns with increasing shopper expectations around price and delivery speed, providing an offering that Aéropostale, A&F and their cohorts haven’t been able to master yet.