Weak Q4 Results Hamper Aeropostale (ARO); Privatization Possibly on the Table - Analyst

Stifel maintains its Hold rating on Aeropostale, Inc. (NYSE: ARO) following Q4 results and guidance from the company on Thursday night. AMC, the retailer reported Q4 loss of $.35 per share with revenue of $670 million, while consensus views were looking for a loss of $.31 per share and revs of $685 million. Comps fell 15 percent in the quarter.

Analyst Richard Jaffe commented, We believe the company’s merchandise has improved with the fashion items (about 20 percent of the merchandise assortment) looking more on trend, especially the company’s new exclusive brands Bethany Mota and Pretty Little Liars. However, given the company’s consistently poor merchandise offerings over the past several years, we believe it will take time for ARO to win back its customers, despite an improved fashion assortment.

Jaffe also alluded to the potential for Aeropostale to go private. He noted that about 45 percent of outstanding common is owned by only five shareholders. The analyst said, We believe that continued fundamental weakness makes a buy-out, perhaps led by Sycamore more likely, possibly providing support to the stock price. Under the new agreement with Sycamore Partners, Aeropostale will issue convertible preferred stock to Sycamore Partners. The convertible preferred stock gives Sycamore Partners the right to acquire up to 5 percent of the company’s common stock. Combined with Sycamore Partners' current ownership of Aeropostale's outstanding common stock, Sycamore Partners' ownership on an as-converted basis would increase to approximately 12.3 percent of the company's outstanding common stock.

For an analyst ratings summary and ratings history on Aeropostale, Inc. click here. For more ratings news on Aeropostale, Inc. click here.

Aeropostale, Inc. closed at $7.30 yesterday, with a 52 week range of $7.62 - $17.10.

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