AGI HoldCo, which does business as Aerosoles, announced on Friday that it has voluntarily filed petitions to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware, according to a company press release.
The company will close up to 74 retail stores as it reorganizes, and has already begun store closing sales as it seeks approval from the bankruptcy court to proceed with those sales. The reduction in the number of retail stores is a "critical portion" of the restructuring, the company said.
Aerosoles plans to maintain four flagship stores in New York and New Jersey. Customers may continue to shop online and at third-party retailers that feature its merchandise, the company also said.
Aerosoles has been trying to find a sweet spot between its reputation for comfort and its appeal as a retailer of affordable footwear for older women to include more fashion-forward options and higher prices. Denise Incandela, who has held executive roles at Saks Fifth Avenue and Ralph Lauren, replaced CEO R. Shawn Neville in April, and on Friday said that the Chapter 11 filing will enable the company to improve its financial structure and right-size its retail footprint, in order to refocus its turnaround strategy.
"For nearly 30 years, Aerosoles has proudly offered consumers stylish and comfortable footwear at a great value," Incandela said in a statement. "This restructuring will enable Aerosoles to become a stronger, more vibrant brand, and position the company for future growth. ... We will continue to create product that leads the market in comfort and fashion, grow our e-commerce, wholesale and international businesses, and promote innovative new marketing campaigns that will drive our business forward.”
Investment firm Palladin Retail Partners added Aerosoles to its stable of retail and apparel companies in 2014: The footwear company has had three chief executives since. With 120 retail locations, the brand had a performance vibe early on. The idea was to be able to walk from home to the subway and work without resorting to wearing one's sneakers, but the brand's appeal has faltered of late, and the tough apparel market has taken its toll.
The company hasn't disclosed its debt load, but it's hardly the only one struggling in today's retail environment. Apparel companies like The Limited, Wet Seal and rival Payless have turned to bankruptcy as their debt obligations collided with a sales downturn. Footwear retailer DSW, by contrast, is among the few retailers that, along with off-price stores such as TJX companies and discount retailers like dollar stores, have been expanding their physical store footprints and edging past analyst expectations for sales and profit.
DSW has also been working diligently to blur its brick-and-mortar and e-commerce businesses — and fulfillment has been a big piece in making that puzzle fit. The retailer has said that it’s shipping about half of its e-commerce sales from its stores, though more e-commerce sales have meant rising delivery costs. As a response, in recent years, the retailer switched to shipping from stores that have excess inventory.
Aerosoles' legal advisor in the restructuring is Ropes & Gray. Berkeley Research Group serves as its restructuring advisor and Piper Jaffray & Co. serves as its investment banker for the restructuring. Hilco Merchant Resources is assisting on store closings. The company will continue to manage its stores and operate its businesses as "debtors in possession" under the jurisdiction of the bankruptcy court, according to the press release.