Aeropostale Resorts To Cost Reduction To Beat Sluggish Business Woes


Teen’s apparel retailer Aeropostale Inc (NYSE: ARO) continues to struggle with diminishing mall traffic and excessive competition, finally announcing its aggressive cost reduction plan.

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Slashing jobs

The strategic move adopted by the company will axe 100 positions, representing 13% of its corporate headcount and helping it save anywhere in between $35 million to $40 million before taxes in fiscal 2016. The company anticipates its pre-tax cash expenses to amount $1.5 million during the fiscal year 2015.

Despite such an aggressive push, the retailer has kept its fourth-quarter outlook intact, implying the close of the fiscal year with further losses.

Over and above that, the company announced that its CEO, Julian R. Geiger, had voluntarily surrendered one million stock options, which will be utilised to retain key members of the company.

Continued efforts

Aeropostale has been unable to recover from the gloomy teen apparel retail environment. Consequently, it is staring at its third consecutive year of losses. Also, the company has to work towards regaining its compliance with the New York Stock Exchange. The current NYSE listing rules mandate the company to maintain the average closing price of its stock above $1 for 30 consecutive trading days and market capitalization above $50 million.

However, the company’s stock has not seen the $1 light since September 2015 while its market capitalization sunk below $20 million. It is believed that the company might resort to a reverse stock-split in order to meet compliance rules of NYSE, though that move would not help its market cap.

In the past, the company had undertaken both national and international expansions in a bid to counter slackening revenues. To this end, the company had signed licensing agreements to set its foot in markets such as Ireland, Indian, Egypt and Thailand, but these moves didn’t help its bottom line.

The stock is up 3.38% in early morning trading and ended the previous session at $0.245 per share.

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