Aeropostale: A Glimmer Of Hope, But I'm Not Turning Bullish
Vince Martin • 14 Comments
Vince Martin • 14 Comments
Aeropostale: Q1 Looks Like The Beginning Of The End
Thu, Mar. 17, 6:16 PM
- "The Board of Directors of Aéropostale has authorized management to explore a full range of strategic and financial alternatives, including a potential sale or restructuring of the Company," says Aeropostale (NYSE:ARO) in its FQ4 report. Stifel has been hired to help out.
- Aeropostale also notes it's in a dispute with MGF Sourcing, an affiliate of P-E investor Sycamore Partners. The apparel retailer notes the dispute "is causing a disruption in the supply of some merchandise, which, if unresolved, could cause a liquidity constraint." Aeropostale's 2014 financing deal with Sycamore included an apparel-sourcing agreement with MGF.
- Shares are down 50% after hours to $0.24 after Aeropostale missed FQ4 sales estimates (EPS was in-line) and reported a 6.7% Y/Y drop in comparable sales (slightly better than FQ3's 10% drop). Gross margin fell 240 bps Y/Y to 20.3%. SG&A spend was 24.1% of revenue vs. 24.7% a year ago.
- FQ1 guidance is for EPS of -$0.35 to -$0.42 vs. a -$0.40 consensus. Aeropostale notes the MGF dispute could increase its op. loss by $5M-$8M if it continues experiencing shipping delays. The FY16 (ends Jan. '17) capex budget is a modest $14M (compares with FY15 capex of $15.7M).
- 811 stores were open at the end of FQ4, down by 13 Q/Q and 47 Y/Y. Aeropostale ended FQ4 with $65.1M in cash and $143M in debt.
- Aeropostale's FQ4 results, earnings release
Jun. 12, 2014, 5:40 PM
- In a new 13D, Sycamore Partners discloses it has a 9.9% Express (EXPR) stake, and says it would like the board's help in performing "due diligence to determine a definitive valuation of [Express] in order to submit a binding, fully financed proposal to acquire all of the remaining common stock of [Express] not owned by Sycamore."
- Sycamore has already taken a large stake in fellow retailer Aeropostale (ARO), and struck a deal last year to acquire The Jones Group.
- ARO +4.8% AH.
Feb. 25, 2014, 6:52 PM
- Bloomberg reports Aeropostale (ARO) is working with Barclays to explore investment options such as a convertible note sale or a PIPE transaction, and is also "weighing a straight-up sale."
- Reuters reported two weeks ago the struggling apparel retailer is open to a PIPE deal. Activist investor Crescendo Partners has been pressing Aeropostale to look for a buyer.
- ARO +3.6% AH.
Jan. 15, 2014, 8:03 AM
Nov. 27, 2013, 7:19 AM
- While the focus in the teen retailing space is on a potential LBO for Aeropostale (ARO), FBR says Abercrombie & Fitch (ANF) may be the better bet.
- "We performed an LBO analysis on the teen players (AEO, ANF, ARO), which have seen their valuations decline over the past few months. ANF ranks the highest in terms of potential (34% IRR), followed by ARO (29% IRR), and AEO (25% IRR)."
- "In our view, ANF currently has the best combination of valuation, FCF, potential for operating improvement, and ability to take on leverage of the three teen retailers, although we acknowledge that a successful LBO may require a change in management. While there is much interest in ARO, its current valuation, required leverage, large capital requirement for significant improvements in profitability, and now management backlash could make it a feat much more difficult than with ANF. We believe an LBO of AEO is prohibitive given its current valuation and less opportunity to improve since it has been the best run of the three companies."
- FBR maintains an Outperform rating and $43 price target on ANF, a Market Perform and $15 price target on American Eagle Outfitters AEO, and a Market Perform rating and $10 price target on ARO.