Aeropostale Adopts Cost-Cutting Measures; Outlook Intact

Waning mall traffic and stiff competition compelled Aéropostale, Inc. ARO to undertake cost-cutting measures, involving the trimming of headcount. However, the news was not well received by investors as the stock fell 5.2% yesterday. In the past one year, this New York-based company has nosedived 92%.

Aéropostale, as part of its cost-curtailment endeavors, expects to save approximately $35–$40 million before taxes in fiscal 2016. The company plans to cut about 100 positions or 13% of its corporate headcount by the end of fiscal 2015.

However, management reiterated fourth-quarter fiscal 2015 operating losses between $0.0 million and $10 million, and continues to expect net loss in the band of 4–17 cents a share. The current Zacks Consensus Estimate for the quarter stand at 15 cents.

Apart from its cost savings program, management announced that Julian R. Geiger, the company's Chief Executive Officer has willingly surrendered 1,000,000 stock options, which will be employed to retain important members of the company.

This mall-based specialty retailer of casual apparel and accessories for young women and men has been facing a lack of demand for its products due to a challenging teen retail environment.

However, to battle dwindling revenues, the company has resorted to both national and international expansion in a big way. The company had entered into licensing agreements to tap the markets of India, Ireland, Thailand and Egypt. It also inked a domestic licensing agreement with Himatsingka America, a home textile major with vast global presence, to expand its reach to new customers.

Aéropostale currently carries a Zacks Rank #3 (Hold).

Stocks that Warrant a Look

Investors interested in the retail space may consider better-ranked stocks such as Abercrombie & Fitch Co. ANF and Express Inc. EXPR both sporting a Zacks Rank #1 (Strong Buy), and American Eagle Outfitters, Inc. AEO carrying a Zacks Rank #2 (Buy).

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