NORTH BRUNSWICK, NJ–Aeropostale Inc. (Aero) filed for Chapter 11 bankruptcy protection on May 4 and announced the “prompt closure” of 113 U.S. stores, but the company has spared its Garden State stores for now.
Aero will shutter its Times Square location in Manhattan, as well as four other New York stores, and three in Pennsylvania. The retailer will also close all 41 of its stores in Canada.
The number of stores closing up for good could grow depending on how the fashion retailer's bankruptcy reorganization unfolds in court.
The apparel retailer has 25 stores in New Jersey and says it is taking the next steps in a “business transformation” that will help it restructure over $390 million of debt.
Aero expects to bring in as much as $21 million from store liquidation sales, which began May 7 and will last up to two months, according to a filing.
The Aeropostale and "P.S. from Aeropostale" stores are next door to each other and open for business at the "Shoppes at North Brunswick," located near the intersection of Route 1 and Route 130. Aero is advertising a clearance sale of 60% off, according to a store sign.
P.S. from Aeropostale is the retailer's new concept for girls and boys ages four to twelve, and "provides an experience that is cool for kids and enjoyable for parents," according to promotional literature.
There is only one other P.S. from Aeropostale in New Jersey, in Elizabeth, at Jersey Gardens. Of the nearly 100 P.S. units in 22 states, only one in Arizona is on the list of stores closing for good.
In court papers, Aero says it secured $160 million in “debtor-in-possession (DIP) financing” from Crystal Financial LLC, so that it can continue business during the bankruptcy.
Together with cash flow from the in-store sales, Aero contends the DIP financing is enough to “meet its go-forward financial commitments,” and “emerge within six months with [the] right-sized footprint,” as a leaner company.
“[Aero] also filed … motions that, pending Court approval, will allow it to pay employee wages and benefits without interruption, honor all gift cards in full … and pay suppliers in the normal course of business,” it says.
The company estimated both assets and liabilities, separately, as more than $100 million but less than $500 million each, according to court papers, and says its assets are more than $354 million.
It listed its number of creditors in the range of 10,000 to 25,000.
Aero owes American Express, the Manhattan-based financial services company, $343,000 for “professional services,” according to a list of Aero’s creditors with the 20 largest unsecured claims. It also owes United Parcel Service (UPS) $182,359, and a whopping $14,287,208 to New York-based LF Sourcing Millwork LLC in “trade debt.”
But one of its key suppliers, MGF Sourcing, formerly known as Mast Global Fashions, which signed a decade long supply agreement involving a $150 million loan arrangement with Sycamore Partners (also Aero’s lender), has reportedly cut off credit to Aero and now requires payment on delivery.
In March, news of a dispute with the vendor broke, and Aero blamed the supplier for a possible “liquidity constraint.” But MGF said it was not in violation, adding that it even reduced payment terms.
“While initiatives such as the implementation of our two-chain Factory and Mall strategy and our merchandise repositioning have started to gain traction, the ripple effects of an ongoing dispute with our second-largest supplier [MGF Sourcing] put substantial strain on our liquidity while also preventing us from realizing the full benefits of our turnaround plans," said Julian Geiger, CEO, Aeropostale.
“We have chosen to take more decisive and aggressive action to create a leaner, more efficient business that is well-positioned to compete and succeed in today’s retail environment,” said Geiger.
While the Aero stores at the Shoppes will remain open, at least for the time being, a bakery and cafe located in the same section of the center has closed: "This Corner Bakery Cafe Location is Permanantly Closed. We thank you for all your support," reads a sign in the window.
Across from the Aero stores, there is a new UFC Gym "Enrollment Center" which has installed a temporary banner seeking members, and displays its phone number and website on the sign.
Next door to the enrollment center, a new "Vanilla Box Mollaga Grill" is apparently going in, according to a construction permit notice dated April 4, 2016.