Aeropostale Takes Steps to Revive - Analyst Blog

For quite some time now, Aeropostale, Inc. ARO has been struggling to strengthen its market position. This mall-based specialty retailer of casual apparel has posted losses for 4 straight quarters and has seen its stock crash about 45% so far in the year. In an effort to uplift itself and focus on avenues with growth potential, the company undertook certain strategic initiatives.

Aeropostale now plans to shutter 125 mall-based P.S. from Aeropostale stores by the end of fiscal 2014. The rationale behind the step is the changing consumer shopping pattern, habits and preferences. In fiscal 2013, the company registered pre-tax losses of approximately $15 million from its mall-based business. As a result, it now intends to concentrate on off-mall locations, e-commerce, international licensing and other third party distribution channels. 

The company is also focusing on areas where it can contain cost. As part of this endeavor, the company plans to lower its workforce by approximately 100, which is in addition to the job cut that will result on account of store closure.

Management hinted that the initiatives announced would help in generating annualized pre-tax savings of approximately $30 million to $35 million, of which approximately $5 million to $10 million is expected to be attained in fiscal 2014. Aeropostale also reiterated its first-quarter fiscal 2014 operating losses between $64 million to $68 million, resulting in net loss of 70 cents to 75 cents a share.

Aeropostale, which  holds a Zacks Rank #4 (Sell), operates 854 Aeropostale outlets in 50 states and Puerto Rico, 77 Aeropostale stores in Canada and 150 P.S. from Aeropostale stores in 31 states and Puerto Rico.

Other Stocks That Warrant a Look

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Skechers USA Inc. SKX holding a Zacks Rank #1 (Strong Buy), and Foot Locker, Inc. FL and American Apparel, Inc. APP both carrying a Zacks Rank #2 (Buy).