Li & Fung Becomes The Main Source for Aeropostale

Li & Fung Becomes The Main Source for Aeropostale

Apr 19, 2016 | Hot Takes

Teen clothing retailer Aeropostale Inc may have a sourcing agreement with Li & Fung making the Hong Kong company its primary clothing supplier. The deal ends a month long feud with former supplier MGF Sourcing. Details of the deal are still in the early stages as both sides were not able to comment on it.

Aeropostale said in March that MGF Sourcing threatened to hold up the delivery of merchandise violating their agreement and would cost the retailer $5 to $8 million. The supplier has said it was looking for protection from the retailer which has suffered years of declining sales and revenue.

The troubled retailer is also facing a number of issues such as declining sales, growing debt as well as a larger than expected loss in the fourth quarter. Li & Fung took the unusual step of requiring cash up front for all shipments from Aeropostale according to Woman’s Wear Daily Blog. The change is significant since retailers usually have a month or two to try to sell the goods before they need to pay their vendors.

Aeropostale is going through a review to try and fix the company or even find sellers for it. The sourcing issue and the review have caused it to delay the release of its latest annual report.

“Due to the considerable time and attention management is devoting to evaluating the implications of these matters, addressing concerns regarding its business operations and the continuing consideration of strategic and financial alternatives, the company has been unable to complete the preparation of its annual report,”