Anyone watching late-night television has heard those ads that urge people to sell the rights to a structured settlement won in a lawsuit to get cash now.
“If you agree to take your award or settlement as a structured settlement, instead of receiving one large amount from the plaintiff, you will receive periodic payments over the course of a fixed number of years,” according to Nolo.com.
The Federal Trade Commission (FTC) explains why selling your settlement for quick cash can often be a very bad idea.
“When you sign over some — or all — of your structured settlement payments to a company in exchange for a lump sum of money, it’s called ‘factoring.’ But you won’t get all the money you would’ve collected over time — and it might leave you without a way to pay your bills,” the FC warned.
It’s a practice dangerous enough to consumers that “Last Week Tonight” host John Oliver did a segment on it, warning people to “run, don’t walk, run away” from factoring companies.
Now, two struggling mall retailers, American Eagle Outfitters and The Children’s Place, have sold the rights to their federal tariff refunds for pennies on the dollar.
The transactions differ in important ways. Structured settlements are designed to provide long-term income for individuals, while tariff refund sales are corporate financing decisions. The similarity is that both involve accepting less money today in exchange for giving up a larger future payment.
American Eagle Outfitters has closed stores
Both American Eagle Outfitters and The Children’s Place have closed stores as part of a broader restructuring plan.
“American Eagle Outfitters has closed three stores in Pennsylvania as part of its restructuring plan to close 35 locations nationwide,” TheStreet’s Kirk O’Neil reported in January.
The chain also made additional cuts beyond its store closures.
American Eagle will discontinue third-party logistics services over the next several months and will close operations at its Boston and Dallas fulfillment centers in the first half of 2026.
The company had previously announced that its La Palma, Calif., fulfillment center would close this year, but its Atlanta fulfillment center will continue to provide distribution services for American Eagle brands.
Turnaround efforts have generally shown progress, according to the company’s first-quarter earnings release.
- Total net revenue of $1.2 billion increased 10% to last year.
- Total comparable sales increased 8%.
- Aerie comparable sales grew 25%. American Eagle comparable sales decreased 2%.
- Gross profit of $456 million rose 41% from $322 million last year.
American Eagle has a manageable debt load, with cash and cash equivalents at about $103.3 million as of May 2, 2026. The chain also has a revolving credit facility of up to $700 million with $85 million outstanding.
The Children’s Place closed stores, too
The Children’s Place began the process of closing stores in 2020.
“Executives said 300 stores will permanently close in the next 20 months: about 100 by the end of the second quarter for a total of 200 closures this year, and another 100 set to close in 2021,” reported Retail Dive.
The chain has continued to selectively close locations since that initial 300, but its recent financial results show less progress than American Eagle’s turnaround, according to the chain’s first-quarter earnings release.
- Net sales decreased $26.9 million, or 11.1%, to $215.2 million in the three months ended May 2, 2026, compared to $242.1 million in the three months ended May 3, 2025.
- The decrease in net sales was driven by a decrease in direct-to-consumer (DTC) sales of 10.2% due to lower traffic compared to the prior year period.
- Gross profit decreased $17.4 million to $53.4 million in the three months ended May 2, 2026, compared to $70.8 million in the three months ended May 3, 2025.
- Operating loss was $42.2 million in the three months ended May 2, 2026, compared to a loss of $24.1 million in the three months ended May 3, 2025.
Unlike American Eagle, which still has a sizable liquidity cushion, The Children’s Place is operating with a much tighter financial position. The company ended the first quarter with $4.8 million in cash and $82.8 million in total liquidity, including available borrowing capacity, while carrying $150 million in revolver borrowings. It also burned $53.8 million in operating cash during the quarter.
In response to the results, CEO Muhammad Umair shared that the company has sold the rights to its tariff refunds.
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“While keeping our prices stable has narrowed our profit margins, further compounded by product cost headwinds from higher tariffs, we have filed for tariff refund claims amounting to approximately $40 million, which we expect to partially offset margin dilution during this fiscal year, and of which $5.5 million has already been received to date,” he said.
The company, he noted, gave up some of its future payment in order to get its cash now.
“Consistent with prior disclosures, we have monetized most of these claims at a discounted rate, by selling the future receipt of these funds to a purchaser,” he added.
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American Eagle Outfitters also sold its refunds
American Eagle Outfitters Michael A. Mathias, who just transitioned from CFO to strategic advisor for the brand, discussed tariff refunds during the chain’s first-quarter earnings call.
“We have applied for roughly $190 million in tariff refunds and anticipate a $140 million net cash benefit,” he said.
The company, he explained, did sell the rights to some of its refunds.
“We at the beginning of the year, we sold about $70 million worth of claims for roughly a $20 million net number. So our net number on the $190 million total filings will be around, should be $140 million if we do get it all back. And, again, we are a little over $100 million back so far, which our portion of that net is around $70 million,” he added.
Selling refunds comes with a risk
American Eagle Outfitters and The Children’s Place are taking less cash overall to get their money faster.
“For the seller, a lot of the risk is purely the economics of that transaction because of the uncertainty on exactly when an importer will receive their tariff refund,” BDO Managing Principal David Wong told Retail Dive.
“That’s been the biggest risk. Do I want to take a discount on the amount that could be refunded to me and get upfront cash today, and how does that compare with the full amount plus interest if I got that amount at a later date?”
American Eagle and The Children’s Place are not alone in selling their refund rights.
With refunds rolling out in phases, some businesses in need of cash are growing impatient, Neil Seiden, managing director at business loan advisory firm Asset Enhancement Solutions, told The Wall Street Journal.
“What we’re seeing now is an increase in folks looking to sell the claims,” he said, noting that inquiries have jumped by at least 50% since early June.
Academy Sports and GoPro also sold rights to at least a portion of their refunds, according to the The Journal.
Those companies sold their rights before the Supreme Court decision that paved the way for the actual refund payments to be made. When a company sold, and at what rate, makes it clear whether a company made the right choice, according to Gregory Husisian, a partner at law firm Foley & Lardner.
“There is still a major category of refunds where both the timing and whether you will get it is uncertain,” he said. “If you’re getting something pretty close to a full recovery and you’re getting it quicker, that combination might be enough.”
American Eagle Outfitters sold $68.9 million of the retailer’s refund claims for $18.6 million in cash, while The Children’s Place sold $38.2 million of its refund claims at a total purchase price of about $25.7 million, according to Retail Dive.
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