Aeropostale (ARO) is guiding for FQ1 EPS of -$0.70 to -$0.75, well below a -$0.17 consensus. The forecast doesn't account for expected consulting fees or "potential accelerated store closures."
The apparel retailer has obtained $150M worth of credit facilities - a 5-year, $100M term loan facility, and a 10-year, $50M term loan facility - from P-E firm Sycamore Partners.
The deal includes an apparel sourcing arrangement with Sycamore-affiliated MGF Sourcing, and also gives Sycamore preferred stock good for buying 5% Aeropostale's common stock at a price of $7.25. If converted, the shares would raise Sycamore's stake to 12.3%.
Aeropostale was previously reported to be weighing investment and sale options. The company ended FQ4 with $106.5M in cash/equivalents, and no debt.
Aeropostale now plans to close 52 stores in FY14 (ends Jan. '15), while opening 7 and remodeling 10. The FY14 capex budget has been lowered to $22M from $35M; FY13 capex was $84M.
Comparable sales (inc. e-commerce) fell 15% Y/Y in FQ4, the same as FQ3. Gross margin fell 680 bps Y/Y to 13%.
Apparel stocks are getting roughed up a bit after Express is the latest retailer to come in with a profit warning for Q1.
The winter storms and holiday promotions that plagued December and January sales totals set the tone for the sector early in the quarter, but concerns are deepening that the promotional atmosphere will be tough to shake off as traffic trends stay weak into March.
Notable decliners: Lululemon (LULU) -3.7%, Aeropostale (ARO) -2.3%, American Eagle Outfitters (AEO) -2.9%, Gap (GPS) -1.9%.
Three Senate Democrats have broken away from Majority Leader Harry Reid's $10.10/hour line in the sand on minimum wage legislation.
Mary Landrieu of Louisiana, Mark Pryor of Arkansas, and Mark Warner of Virginia have all tipped off that they think there could be some room to negotiate over the amount of an increase over the current federal minimum wage of $7.25/hour. The GOP likes the status quo, but is viewed as likely to give some ground in an election year.
Federal minimum wage legislation could create higher costs in the retail and restaurants sectors as companies adjust to the new higher floor.
Last week, Gap made a preemptive move to raise its own hourly wage in a development that stirred the pot a little bit.