Aeropostale Inc. plunged as much as 58 percent after announcing plans to explore strategic alternatives, a sign the unprofitable teen-apparel chain is struggling to turn around its business.
The board has authorized management to consider a sale or restructuring of the company, and advisers such as Stifel Financial Corp. are helping with the review, according to a statement Thursday. The announcement followed a deeper loss in the fourth quarter, which ended Jan. 30.
Aeropostale is seeking more drastic solutions to its problems following three years of red ink and tumbling sales. The company hasn’t managed to win back teen customers, who are increasingly buying clothes online instead of at the mall. The retailer already announced a cost-cutting plan in January, and it’s been working with the New York Stock Exchange to avoid being delisted. Meanwhile, private equity firm Sycamore Partners -- once seen as the company’s savior -- has distanced itself from the beleaguered merchant.
Aeropostale’s stock plummeted as low as 20 cents in New York. The shares had already plunged 84 percent in the 12 months through Thursday’s close.
Its net loss expanded to $21.7 million, or 27 cents a share, from $13.5 million, or 17 cents, a year earlier. Excluding some items, the loss was 14 cents a share in the period. Analysts estimated 13 cents on average.
Sales fell 16 percent to $498 million, missing the $519.1 million predicted by analysts.
Aeropostale also is waging a dispute with one of its vendors, MGF Sourcing US LLC, which is affiliated with Sycamore. That’s disrupting the supply of merchandise and could lead to cash constraints, the company said. The problem could worsen losses by $5 million to $8 million if shipping delays continue, Aeropostale said.
In response, MGF Sourcing said it’s not in violation of its contract with Aeropostale. The vendor is protecting itself by reducing its payment terms in accordance with their agreement, a representative for the supplier said.
Aeropostale expects a first-quarter loss of 35 cents to 42 cents a share. Analysts had estimated a deficit of about 40 cents. The New York-based company plans to spend about $14 million remodeling stores and fixing its infrastructure this year, compared with spending of $15.7 million in 2015.
In February, Aeropostale introduced its Factory chain, a bid to appeal to budget-minded shoppers. It now plans to convert about 60 percent of its store base, mostly in lower-tier malls, into Factory stores, which will have a simpler assortment of items and a greater focus on value.
The full transition will be in place by the back-to-school season, Geiger said on the company’s earnings conference call. The retailer will also add a Factory tab to its website. The remainder of stores will have a more fashion-forward selection.
So far, comparable sales at Factory stores have increased by a low-double-digit percent since February.