Aéropostale Liquidation Seems Imminent

It is appearing more and more likely that liquidation will be the final fate of Aéropostale after a bankruptcy judge ruled last week that private equity firm Sycamore Partners could use the $150 million it is owed by the bankrupt teen retailer as a bid at its bankruptcy auction.

Sycamore Partners and some liquidator partners entered their bids for the retailer last week, while Versa Capital Management appears to have backed out of its plan to try and save about 500 Aéropostale locations.

Now, it appears that Sycamore Partners will use its leverage to liquidate the teen retailer, meaning store closings and tens of thousands of jobs lost.

“Aéropostale stands by the accuracy and truthfulness of everything said and documented by it during the proceedings,” the company said in a statement to Reuters.

Throughout the controversial bankruptcy process, Sycamore Partners, which acquired a $150 million stake in Aéropostale back in 2014, maintains that the retailer is facing bankruptcy due to poor management decisions. As part of that 2014 agreement, Aéropostale also agreed to source with MGF, a clothing manufacturer and supply chain management company owned by Sycamore.

Aéropostale has maintained throughout its bankruptcy process that its sourcing agreement with Sycamore placed a tremendous burden on the company and is one of the primary factors that led to its bankruptcy.

“Aéropostale had this really strong brand in early 2000, but once the hoodies and graphic tees went out of style, Aéro didn’t find a replacement strategy,” Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext, told Retail Dive. “Today, Aéro is all about price. They have this kind of junior customer who’s not quite a fast-fashion customer, where mom’s the real shopper, taking the 11-year-old into the store. So, if that trend is off or too sexy for this kid, mom’s not going to be buying that. So, I think they’re missing the trend for that market.”