viLast month, clothing company Aeropostale Inc. became the most recent retailer to file a Chapter 11 bankruptcy. Aeropostale operates 739 stores in 50 states and Puerto Rico and also has 41 stores in Canada. Aeropostale’s bankruptcy comes on the heels of various other high-profile retailer bankruptcies over the past year, including American Apparel Inc., Pacific Sunwear of California Inc., Quiksilver Inc., and Sports Authority Inc. Commentators have noted that Aeropostale and other mall-based retailers have struggled to adapt to competition from online merchants and the changing tastes of teenagers.
One advantage of Chapter 11 is that it will allow Aeropostale to continue operating while its management team develops a plan to restructure the company’s debt. It also protects employees and other stakeholders from liquidation and forces Aeropostale to reevaluate the economics of its operating plan and financial condition. Aeropostale plans to close 113 U.S. stores and all 41 stores in Canada. Aeropostale currently operates 14 stores in Arizona and plans to close 3 locations—its store at Scottsdale Fashion Square and two in Tucson. The other 11 Arizona locations will remain open. In addition to deceasing its footprint, Aeropostale will likely use Chapter 11 to restructure its debts and renegotiate its leases. If you or anyone you know has questions regarding bankruptcy, please visit our website at davismiles.com or contact me directly at pgardner@davismiles.com or via phone at (480) 733-6800.