Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Aeropostale has almost completely unraveled. Any takers?

The teen apparel retailer's shares tanked as much as 50 percent in pre-market trading Friday, sending its stock to as low as 24 cents on the dollar and its market value below $20 million, after it reported a fourth-quarter loss and said it would consider strategic alternatives including a sale or restructuring. It's a move that's been a long time coming, considering the company has spent the last few years falling  further and further out of favor with customers, and in turn investors. Witness its 14 straight quarters of declining same-store sales:

Losing Shoppers
Aeropostale could have mitigated the bleeding by more aggressively closing poorly performing stores.
Source: Bloomberg

For Sycamore Partners, the retailer's death spiral has been particularly painful. In 2013, the private equity firm paid $54 million for a roughly 8 percent stake in Aeropostale in a move that sparked speculation it would follow Hot Topic and Talbots into Sycamore's stable of private companies. Last month, though, the New York firm swallowed a loss by selling those shares for roughly $1.1 million

But it hasn't been a complete wipe-out. Since 2014, Sycamore has earned nearly $20 million in interest payments attached to a $150 million loan. That means it'll have a prominent role in the event of a restructuring or bankruptcy and will emerge with a controlling stake if debt is swapped for equity.

It's unclear how quickly that will happen, seeing as the company has cash and cash equivalents of $65.1 million, but Sycamore appears to be in a position to accelerate distress. 

Aeropostale said it's in a dispute with one of the private equity firm's affiliates, which has restricted the supply of merchandise, a move that may lead to cash constraints and steeper losses for the retailer. The company, MGF Sourcing, said its actions are within the bounds of the duo's contract which was struck as part of Sycamore's lending agreement. 

Hanging by a Thread
The teen retailer's shares plunged in early-market trading after falling close to 98 percent over the last five years.
Source: Bloomberg

For Aeropostale, demise could have been avoided if it had more quickly adapted to changing consumer tastes by dropping large logos and better identifying trends the way fast-fashion gurus H&M and Forever 21 have. Plus, it should have taken a harder look at store closures in the U.S.. where it currently has 769 locations. That compares with Abercrombie & Fitch's 754 and American Eagle Outfitter's 904 -- and both rivals post annual revenue more than double that of Aeropostale's. 

Since 2013, the retailer's annual sales have sunk 40 percent to $1.5 billion and its narrowing gross margins have caused investors to balk.

Hard Hit
Aeropostale's margins have been hit by aggressive discounting and currency fluctuations faced by international licencees.
Source: Bloomberg

A second chance under new owners may provide welcome relief and for would-be acquirers, the price is certainly right. If they can effectively taking the "stale" out of Aeropostale, there's hope for it yet.  

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at