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Abercrombie & Fitch’s former competition is on the brink of bankruptcy
Instagram/Bethany Noel Mota
In the early aughts, Aeropostale was a staple for teens.
It was less expensive than its racy mall competitor Abercrombie & Fitch, and it wasn't as bohemian as American Eagle.
But Aeropostale is — and has been — a sinking ship.
It's on the brink of filing for Chapter 11 bankruptcy this week and shuttering 100 stores, The Wall Street Journal reports.
It had been previously reported that Aeropostale was preparing to file for bankruptcy. The stock sunk nearly 30% to $0.15 following the report, prompting the New York Stock Exchange to halt trading in the company.
"NYSE Regulation has now determined that the Company is no longer suitable for listing based on 'abnormally low' price levels, pursuant to Section 802.01D of the Listed Company Manual," the NYSE said in a statement to Business Insider's Bob Bryan last month.
In March, the Wall Street Journal had reported the company was looking to sell or possibly restructure.
This came off of a rough fourth quarter and an even rougher fiscal 2015. At the end of the fourth quarter of fiscal 2015, comparable sales fell 6.7%. For the entirety of fiscal 2015, comparable sales fell 8.6%.
Instagram/Bethany Noel Mota
The current retail climate hasn't been helping Aeropostale salvage itself.
It's a tough time to be a mall retailer. Traditional retailers that do not move as swiftly as fast-fashion retailers like Zara often cannot keep up with the competition. When they can't clear inventory, they're forced to throw themselves into the promotional cycle, a problem that has plagued Aeropostale. And unappealing styles do not help.
"The central problem for Aero remains that it is firmly out of favor with the fickle younger consumer," Conlumino analyst Håkon Helgesen wrote in a note to clients after fourth quarter earnings were released in March. "Indeed, it has now become a brand that gets overlooked on many shopping trips simply because its range does not resonate and has little relevance. While consumer tastes have shifted, Aero has steadfastly clung to a range that looks more at home in the mid 2000s than 2016, and a store environment that all too often resembles a yard sale."
Aeropostale tried to appeal to young people. The company secured Bethany Mota for her own collections in 2014. However, even a top Instagram celebrity couldn't salvage the brand or make it resonate with young, discerning consumers.
"This misalignment, combined with the boredom that arises from a lack of change, has resulted in many shoppers defecting from the brand and switching to fast-fashion rivals like H&M and Zara," Helgesen wrote. "In response, Aero has attempted to stimulate demand with heavy discounts and promotions. However, as the problem lies with product design and assortment, rather than with pricing, the impact on sales has been negligible while the effect on margins has been horrific."
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