Dive Brief:

• UPDATE: As expected, Aeropostale filed for Chapter 11 bankruptcy protection on Wednesday, according to a press release issued by the company.

• In a court filing, the struggling teen apparel retailer said it will finance its operations during the Chapter 11 process with a $160 million loan from Crystal Financial, along with its operating cash flow, Reuters reports. The company said it expects to emerge within six months having solved its dispute with shareholder Sycamore Partners, which had invested in the company and provided it a $150 million loan in 2014.

• Aeropostale filed Chapter 11 before its May rental payments are due. Vendors are closing in: The Wall Street Journal reported that apparel manufacturer MGF Sourcing in recent months has begun demanding upfront payments.

• Aeropostale last month said it wouldn’t fight delisting from the New York Stock Exchange, and has begun trading on the OTCQX Best Market marketplace. 

Dive Insight:

Known as one of the “three A’s” in teen apparel, Aeropostale has fallen behind the other two, Abercrombie & Fitch and American Eagle Outfitters. While increased competition from fast-fashion and online retailers, declining mall traffic and shifting preferences to spending on experiences rather than clothes continue to beset all three, merchandising changes have enabled Abercrombie and American Eagle to ease up on heavy discounting in addition to selling more.

Abercrombie and American Eagle have also dispensed with logo-heavy looks that have fallen out of favor, instead focusing on quality and on decreasing inventory levels.

Aeropostale has made few such moves. In March Aeropostale reported that Q4 same-store sales (including e-commerce) fell 6.7% year over year, a stark contrast to the rebounds seen at Abercrombie & Fitch and American Eagle Outfitters. Aeropostale closed 13 stores in the fourth quarter, while net sales decreased 16.1% year-over-year. The company also said last week that it would delay filing its annual report.

Sources told Bloomberg last month that Aeropostale was seeking to reorganize and work on financing to fund operations under Chapter 11. But as Sports Authority has recently found, bankruptcy protection doesn’t mean smooth sailing for reorganization by any means.

The Wall Street Journal notes that, in addition to any inability to compete that led Aeropostale to Chapter 11 in the first place, it can be difficult to get out of leases that allow for store closures. More than half (55%) of U.S. retailers filing for bankruptcy protection in the last decade have exited the business altogether, compared to 5% of businesses in other industries, according to consulting firm AlixPartners LLP.

UPDATE: Neil Saunders, CEO of research firm Conlumino, told Reuters Wednesday that Aeropostale is likely to emerge more or less intact from the bankruptcy process, although it will still have to work on ways to bring back customers.

"Aeropostale will likely emerge from Chapter 11 as a leaner entity with a smaller, but largely profitable, store base...but it does not solve the issue of relevance to the market," Saunders said.