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Aeropostale Will Cut 100 Jobs, Shut Mall-Based P.S. Stores

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May 1 (Bloomberg) -- Aeropostale Inc., a retail chain that sells teen and children’s apparel, plans to cut about 100 jobs and shut mall-based locations of its P.S. kids-focused stores as part of a comeback effort.

The company will be closing about 125 of its P.S. locations in shopping malls, a response to changing buying patterns by moms, according to a statement yesterday. Aeropostale also is making corporate-level cost reductions, including the 100 job cuts. The company had said in March that it planned to close 50 Aeropostale stores and two P.S. stores this year.

Chief Executive Officer Tom Johnson is trying to turn around the retailer after five straight quarters of losses. In March, the chain announced it entered a strategic partnership with Sycamore Partners, which will provide Aeropostale with a $150 million loan. Meanwhile, Crescendo Partners has been pressing Aeropostale management for bigger changes, sending a letter in November demanding that the company find a buyer.

The reductions “reflect the very difficult but necessary decisions we have made to align our business with overall retail market trends,” Johnson said in the statement.

The latest changes will bring one-time charges of $40 million to $65 million, with as much as $40 million taking the form of cash expenses, the company said. Aeropostale worked with AlixPartners LLP on the strategic review that led to the restructuring.

Cash Crunch

Kimberly Greenberger, a New York-based analyst at Morgan Stanley, said in March that the company could run out of cash by the end of the first quarter. While Aeropostale ended the fourth quarter with $106 million in cash, its accounts payable “ballooned,” driven by delayed rent payments, she said. Greenberger estimated that Aeropostale’s cash burn would be $61 million in the first quarter, leaving the retailer with about $7 million at the end of the period.

Aeropostale reaffirmed its first-quarter outlook, saying it expects to post an operating loss of $64 million to $68 million, or 70 cents to 75 cents a share. That loss excludes the impact of yesterday’s move, the New York-based company said.

The shares fell 1 percent to $4.92 at the close of trading in New York. The stock has declined 46 percent this year.

To contact the reporter on this story: Lindsey Rupp in New York at lrupp2@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net

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