Aeropostale Inc., the operator of more than 1,000 teen and children’s apparel stores in North America, should consider selling itself, activist investment firm Crescendo Partners said.
In a letter to the company’s board, Crescendo said that although New York-based Aeropostale is trying to improve sales and close underperforming stores, the turnaround effort would be more effective as a private company.
“We think there will be very substantial support among shareholders,” Crescendo Chief Executive Officer Eric Rosenfeld said in telephone interview. “It could be a strategic sale or a sale to a a private entity. We’re urging them to start the process immediately.”
Crescendo said it sees a sale price of $14 to $16 a share and that it “believes that numerous potential buyers will be interested in acquiring Aeropostale because of its strong brand name and its compelling valuation.”
Aeropostale Chief Executive Officer Tom Johnson is trying to turn the struggling retailer around with updated fashions and a plan to close as many as 40 underperforming stores this year.
Aeropostale will probably see sales decline in the year ending in January, analysts estimate, as cash-strapped teens shun logos and the mall for Internet and boutique shopping. Aeropostale will announce a loss of 25 cents a share for the third quarter, according to the average of 26 analysts’ estimates compiled by Bloomberg. Aeropostale will report third-quarter earnings Dec. 4.
Rosenfeld declined to disclose the size of the stake Crescendo and its affiliates own. The company typically holds stock for more than three years, he said.
The shares advanced 4 percent to $10.44 at 9:37 a.m. in New York. They have declined 23 percent this year through the close of regular trading yesterday, compared with a 25 percent gain in the Standard & Poor’s 500 Index.
Rosenfeld said the firm will nominate new directors by early next year. In 2013, Aeropostale held its annual shareholder meeting in June.
Private-equity firm Sycamore Partners took an 8 percent stake in the company through its Hummingbird LLC unit in September. In June, Sycamore purchased teen retailer Hot Topic for about $533.5 million and also was in talks to buy Billabong International Ltd. before talks ended.