Will Aeropostale Be The Next Bankrupt Teen Retailer?

Shares of Aeropostale Inc ARO plummeted approximately 8 percent Thursday amid a report from Forbes that bankruptcy may be in its future.

Carol Ko wrote, "Declining mall traffic has eaten away at the teen retail sector, contributing to the recent bankruptcy filings of once-iconic 90s brands such as dELiA*s, Wet Seal and Deb Shops."

Ko commented that industry pessimists are now looking at Aeropostale as possibly the next retailer to fail as it burned through $84 million in cash during 2014 and faces continued losses in 2015.

The market has also responded to Aeropostale's poor performance by sending the stock down nearly 50 percent in the past 12 months.

According to Ko, teens prefer spending time in coffee shops with power outlets and wi-fi rather than keeping up with clothing trends offered by retailers in shopping malls.

The report suggested that teen interests have shifted from clothing fashions to keeping up with technology and apps.

Ko noted the trend "spells trouble for legacy mall-based brands like Aeropostale, which has historically banked on teenage demand for pricy branded hoodies and jeans — products that no longer hold sway over the latest crop of teenage customers who never developed the same sense of brand loyalty to logo-bearing apparel."

Investment firm Sycamore Partners had extended a financial lifeline to the company, however, even Sycamore had difficulty recently in raising capital.

Ko concluded by stating that the jury was still out on on Aeropostale's fate, however, "if investors continue to view mall-based retail as a poor long-term investment, the clock may run out for teen retail chains in need of funding to stave off their slide into irrelevance."

Aeropostale will report its Q4 financial results Thursday after the market close.

Heading into its earnings release, Aeropostale traded at $3.67, down 7.56 percent.