Struggles Continue for Aeropostale as Q2 Profit Falls

aeroNew York–Aeropostale has recorded second quarter figures in line with management guidance, but analysts believe the teen apparel retailer continues to struggle.

In the three months to August 3, the company widened its net loss to $63.8 million. This compares to a loss of $33.7 million a year earlier and is the result of restructuring and impairment charges.

Net sales dropped 13% to $396.2 million, while comparable sales, including the e-commerce channel, declined 13%.

Aeropostale was negatively impacted by weak traffic and a highly promotional mall environment in the quarter, as well as ongoing and significant merchandising issues.

Stifel analyst Richard Jaffe, noted that Aeropostale’s management, facing the need to update and reposition its merchandise offering, has struggled.

“Its historically successful business of promotionally priced logo tees, hoodies and denim has lost its appeal with their teen customers. Aeropostale’s efforts to introduce a more fashionable and trend-right assortment has proven very difficult. Trends continue to be weak and management has issued guidance below the Street.”

He pointed to the replacement this week of CEO Thomas Johnson with former Aeropostale chief executive Julian Geiger as a positive move, but added: “It will take time for changes put in place by returning CEO Julian Geiger to come to fruition. We believe the reward potential is limited near term and risk remains significant, given the current fashion, merchandising, and retail consumer challenges.”

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