Death is once again sweeping through the retail industry thanks to the rise of online shopping and fickle U.S. consumers.
Aeropostale (ARO) is preparing to file for bankruptcy protection this week and close more than 100 of its 800 stores, according to a report by The Wall Street Journal. The company plans to seek Chapter 11 protection in the next few days before May rent payments are due. It is in advanced talks with specialty lender Crystal Financial on a loan to finance its operations in bankruptcy, the Journal reported. Aeropostale's stock was recently de-listed by the New York Stock Exchange.
The struggling teen apparel retailer will likely join several other once-prominent retailers that have recently filed for bankruptcy, which TheStreet looks at below.
Overall, the news of fresh bankruptcies in the retail space may be giving investors flashbacks to the immediate aftermath of the Great Recession, where retailers includnig Delia's, Circuit City, RadioShack, Borders and Linens n Things were several of the most high-profile casualities.
Big winner from Sports Authority's demise: Dick's Sporting Goods.
1. The Sports Authority
Ailing sporting goods retailer Sports Authority decided over the weekend against reorganization and instead will liquidate its 450 stores in 27 states. The company, saddled with more than $1.1 billion in debt, initially filed for Chapter 11 bankruptcy in early March and planned to close about 143 stores.
Sports Authority hasn't publicly announced a closing date.
The eventual disappearance of Sports Authority, likely before the holiday season, will leave rival Dick's Sporting Goods (DKS) in the enviable position of being the dominant sporting goods retailer in the country. As a result, it could be poised to ring up some serious sales and profit at its more than 640 stores.
"We view the [Sports Authority] news as incremental good news for Dick's, as the likely biggest recipient of the approximately $2.6 billion of sales that will now be up for grab," said Deutsche Bank analyst Mike Baker in a May 2 note to clients.
According to Baker's math, if Dick's picks up 20% of Sports Authority's sales it would equate to $520 million in new business, which would be the equivalent to a 7% boost to same-store sales over the next year. The analyst estimated the sales jolt would add roughly $136 million in operating profits in a year's time, or 75 cents a share.
Fast-fashion retailers such as H&M have crushed PacSun.
2. Pacific Sunwear
The beleaguered teen apparel retailer filed for Chapter 11 bankruptcy on April 7 in an attempt to shed some of the costs related to under-performing stores and gain access to badly-needed capital to make it to the key holiday selling season.
As part of the reorganization plan, private equity firm Golden Capital -- which had extended a $60 million loan to PacSun in 2011 -- will convert 65% of its debt into equity, effectively giving it control of the company once it emerges bankruptcy in about 4-6 months. It will also provide a minimum of $20 million in additional capital upon PacSun's emergence from Chapter 11.
Wells Fargo has also committed $100 million in debtor-in-possession financing, as well as a five-year $100 million revolving line of credit.
PacSun said the reorganization plan will allow it to address "very high occupancy" costs of some $140 million a year, while foregoing having to dole out cash it didn't have to service $90 million in debt coming due later this year. The company has not disclosed how many stores it intends to close as part of the reorganization process or the number of expected layoffs.
Fairway has produced losses every quarter since it went public.
Grocery store chain Fairway Group Holdings (FWM) filed for Chapter 11 bankruptcy protection on Monday, according to a court filing. Fairway listed assets in the range of $100 million to $500 million, and liabilities of $100 million to $500 million. The company, which operates 15 stores in the New York City area, has lost money every quarter since it went public in 2013. It was not disclosed how many stores it would close during its restructuring process.
Fairway's weakened financial state, which could lead to some store closures, may benefit rival Whole Foods Market (WFM) , which operates nine stores in New York City's borough of Manhattan and one in Brooklyn.