Plans to exit the P.S. from Aeropostale mall locations – Based on changing consumer patterns, particularly of the "mom" shopper, the Company has made the determination to close approximately 125 mall-based P.S. from Aeropostale stores by the end of fiscal 2014.
The Company plans to restructure the brand to focus on faster growing sales channels, including off-mall locations (including outlets), e-commerce, and international licensing. The Company is also exploring other potential third party distribution channels. By taking these steps, the Company expects to eliminate pre-tax losses of approximately $15 million that were generated in the mall-based business in fiscal 2013, excluding any impairment charges.
Streamlining and improvement of expense structure – Following a thorough review of the Company's current cost structure, Aeropostale has implemented a cost reduction plan that will target both direct and indirect spending across the organization. This includes the Company's plans to reduce corporate headcount by approximately 100 positions to align with current business strategies, in addition to the workforce reductions from the Company's on-going store closure program.
The Company estimates that it will record pre-tax restructuring, asset impairment, and other charges of approximately $40 million to $65 million during fiscal 2014 related to these actions, of which approximately $25 million to $40 million are estimated to be cash expenses.
"The steps we are announcing today build on our turnaround efforts from the past year," said Thomas P. Johnson, Chief Executive Officer of Aeropostale, Inc. "Through the restructuring of our P.S. from Aeropostale brand, and expansion of our expense savings program, we will be better positioned financially and have laid the groundwork for the future. In addition to today's steps, our transaction with Sycamore Partners continues to proceed as planned, and will also provide additional runway to continue to implement our merchandising, marketing, and operational strategies designed to reposition the Aeropostale brand."
Mr. Johnson continued, "Today's actions reflect the very difficult but necessary decisions we have made to align our business with overall retail market trends. We thank all of the employees who have contributed to Aeropostale's turnaround plans for their diligence and dedication."
Global business advisory firm, AlixPartners LLP, served as advisor during the Company's strategic business review process. The Company continues to work with real estate consultants to optimize its real estate portfolio and will provide an update at a later date.
Reaffirms First Quarter 2014 Outlook
In line with prior guidance, the Company continues to expect first quarter 2014 operating losses in the range of $64 million to $68 million, which translates to a net loss in the range of $0.70 to $0.75 per diluted share. This outlook is provided on a non-GAAP basis because it excludes the impact of today's announced strategic initiatives, as well as any expected consulting fees associated with these announcements. Due to uncertainties in estimating the absolute costs of these items, there is no readily accessible GAAP reconciliation available at this time.
About Aeropostale, Inc.
Aeropostale®, Inc. is a primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aeropostale® stores and 4 to 12 year-old kids through its P.S. from Aeropostale® stores. The Company provides customers with a focused selection of high quality fashion and fashion basics at compelling values in an innovative and exciting store environment. Aeropostale® maintains control over its proprietary brands by designing, sourcing, marketing and selling all of its own merchandise. Aeropostale® products can only be purchased in Aeropostale® stores and online at www.Aeropostale.com. P.S. from Aeropostale® products can be purchased in P.S. from Aeropostale® stores and online at www.ps4u.com and www.Aeropostale.com. The Company currently operates 854 Aeropostale® stores in 50 states and Puerto Rico, 77 Aeropostale stores in Canada and 150 P.S. from Aeropostale® stores in 31 states and Puerto Rico. In addition, pursuant to various licensing agreements, our licensees currently operate 117 Aeropostale® locations and one Aeropostale® and P.S. from Aeropostale® store in the Middle East, Asia, Europe, and Latin America. On November 13, 2012, Aeropostale, Inc. acquired substantially all of the assets of online women's fashion footwear and apparel retailer GoJane.com, Inc. Based in Ontario, California, GoJane.com focuses primarily on fashion footwear, with a select offering of contemporary apparel and other accessories.
About AlixPartners LLP
AlixPartners is a leading global business advisory firm specializing in creating value and improving performance at every stage of the business life cycle. Since 1981, AlixPartners has been trusted advisors to corporate boards and management, law firms, investment banks, investors, and others who value independent strategic thinking, critical insights, and actionable expertise.
For more information, visit www.alixpartners.com.
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