Delia*s Inc said it was liquidating assets and would file for Chapter 11 bankruptcy protection "in the very near term," becoming the second teen retailer to go out of business in as many days.
Delia*s announcement wiped out more than 85 percent of the company's market value on Friday.
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Teen and young women's fashion chain Deb Shops, which is controlled by private equity firm Cerberus Capital Management , filed for its second bankruptcy in less than four years on Thursday and said it would seek a buyer.
Several teen apparel retailers have been losing market share to fast-fashion brands such as H&M, Forever 21 and Inditex's Zara, which bring the latest styles from the runway to their stores within weeks.
Many, like Abercrombie & Fitch Co, are moving away from logo-based goods to trendier merchandise that appeals to fashion-conscious teens and increasing online presence.
Sales at Delia*s, which has 95 mall-based stores, has fallen for six quarters in a row.
The New York-based company, which launched a review of strategic alternatives in September, said it was unable to sell itself or secure financing to allow it to remain a going concern.
The company, which has not reported a quarterly profit since early 2011, had total liabilities of $37.6 million and assets of $75.6 million as of Aug. 2.
The company had 499 full-time and 1,190 part-time employees as of February.
Delia*s shares were trading at 1.5 cents. The stock, which traded as high as $12 in 2006, hit a 52-week high of $1.35 in March. (Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty)