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Case Update: Aeropostale Bankruptcy

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The once popular teen clothing retailer Aeropostale filed for Chapter 11 bankruptcy recently, an action which has caused many to question what went wrong.

Contributing Factors

The filing seems to stem from a financial battle with the company’s second-largest supplier, MGF Sourcing. When Aeropostale began having financial struggles, the supplier called for cash upfront with every delivery, which demands the retailer simply could not meet. The brand’s CFO David Dick cited decreased mall traffic and fierce competition in the market as culprits for the money problems.

Issues Facing Teen Retailers

Outside of the primary causes for financial decline cited by the company, there are other significant issues facing many teen retailers today — many of which, like Aeropostale, have been forced to file for bankruptcy protection as well. The Associated Press recently outlined the hurdles these brands have been forced to leap in recent years, with the biggest issue being the sheer fact that teens no longer want to dress like their peers. This approach to fashion is what many of these companies were based on, and it is one that is not working anymore.

Malls are changing as well, shifting from a place to spend the day to a place to go for very specific items. Thanks to the Internet, teens, and shoppers in general, are able to research their purchases thoroughly before buying, making Aeropostale’s prime location in the once hot spot for teenagers to hang out a far less valuable asset.

If companies like Aeropostale want to avoid their own bankruptcy filings, the best advice is to move with the times. For example, Aeropostale tried to identify with Instagram obsessed teens by partnering with beauty video blogger Bethany Mota, but the move proved to be too little too late. Successful companies going forward will likely mirror the approach taken by brands like Forever 21, offering a wide variety of items at low cost and embracing the digital landscape.

If you are in need of counseling on your company’s financial struggles, look no further. A West Palm Beach bankruptcy attorney at Kelley, Fulton & Kaplan can advise you of the best move for your business, so call today.

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