Dive Brief:

• Private equity firm Versa Capital Management is in talks to buy 500 Aeropostale stores, mostly in malls in the U.S., according to a Thursday court filing, Fortune reports. Neither the firm nor the retailer has commented.

• Versa specializes in distressed investments and would pay an undisclosed amount for the bankrupt teen retailer’s investors and leases. The offer could serve as a stalking horse bid in a bankruptcy auction scheduled later this month; bids are due Aug. 18.

• Versa in May 2015 took over Wet Seal clothing stores and invested $10 million to help right the company, after the firm prevailed at that teen retailer’s bankruptcy auction last year. 

Dive Insight:

The protection of Chapter 11 and (if Versa prevails) going private could give Aeropostale a fighting chance to make a comeback, but it will be a uphill climb.

Aeropostale hobbled itself in recent years, experts told Retail Dive, by hewing too closely to trends set by Abercrombie & Fitch and American Eagle, the so-called "other two A's"—especially the former, which under then-CEO Mike Jeffries virtually defined teen fashion in the previous decade—and failed to develop a vision of its own. That’s made it difficult for Aeropostale to pivot without much of a fulcrum.

Equally problematic, Aeropostale hasn’t found a way to sell apparel without massive, margin-killing discounting, further dimming its prospects for post-Chapter 11 survival, says Shelley E. Kohan, VP of retail consulting at store analytics firm RetailNext. Kohan told Retail Dive that Aeropostale's clothing is of high quality, yet the retailer has depended on discounts to keep customers coming in to stores.

Aeropostale has traditionally targeted its marketing to older teens, but tweens and their parents are in fact its true customers, Kohan said. “I think it’s going to be a struggle for them unless they quickly define a better specific target market and rethink their margin problem,” she said. “When you have razor-thin margins, you cannot expense your way into a profit, and that’s always going to be a challenge for them. And they’re going to have to figure that out.”

That’s a problem that will fall to Versa if a deal is reached. Wet Seal has been working to pivot its approach to appeal to older teens and college students, and Aeropostale may try to do the same. It would likely take changes to its styles, and it’s unclear how much room there is in the space, considering the abundance of players and teens’ reluctance to pay high prices for apparel.