Aeropostale Explores Strategic Options After Another Poor Quarterly Result

March 19
12:25 AM 2016

Aeropostale Inc (ARO.N) is now considering a possible sale after its quarterly reports continue to book further loss.  On Thursday the company's shares plunged deeper to reach the penny-stock territory.

According to PR Newswire, the company reported a net loss of $21.7 million in the fourth quarter that ended January 30, equalling to a $0.27 loss per diluted share. Compared to last year, the company booked a net loss of $13.5 million which was equivalent to $0.17 loss per diluted share. This quarterly loss was the 13th consecutive quarterly losses Aeropostale has experienced.

Its quarterly sales also fell 16% to $498 million, below analyst prediction by $519.1 million. Comparable sales including the e-commerce channel also decreased by 8.6%, which was better than the 11.1% decrease for the corresponding period on previous year. In the full fiscal year performance, the 2015 fiscal was reported a decline by 18% of net sales to $1.5 billion from last year's $1.8 billion.

Following its quarterly loss report, the company's shares was cut more than a half and down 52%. The compnay's share plunged and reached a penny-stock territory in Thursday trading. Aeropostale's stock is now valued at 30 cents a share.

The teen apparel retailer said that it is also set to face liquidity constraint if it fails to resolve supply dispute with its key vendor MGF Sourcing. Aeropostale did not provide further details regarding the dispute, but Reuters reported that Aeropostale CEO Julian Geiger said the issue was hurting the company's short-term visibility.

MGF is an affiliate of Sycamore Partners, the private equity firm that saved Aeropostale in 2014 by providing $150 million fund. Currently, Sycamore owns 8% of the company.

Although the company has launched a heavy discount to attract shoppers and closed unprofitable stores, that did not help its performance. Following its continuous poor performance, the retailer is considering strategic options which  also means  selling the company, and "Sycamore is the obvious choice for a buyer," said Jeff Toohig an ITG analyst.

"But given the loans outstanding and the potentially violated sourcing agreement ... one imagines Sycamore will be able to take control of ARO without paying much if anything before too long. That is, if they still want it," Toohig said further.

Bloomberg reported that Sycamore has distanced away from Aeropostale. The retailer also failed to win back its teen customers who prefer to buy clothes online rather than go to the mall.

Aeropostale is struggling to find the best option to survive and exploring strategic option as its loss continues. That option includes selling the company. However, its possible buyer Sycamore that saved the company in 2014 has backed away from Aeropostale.

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