Aeropostale (ARO) Plans Streamlining; Affirms Q4 Outlook

January 12, 2016 4:19 PM EST
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Price: $0.15 --0%

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Net sales: 320.89M

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Aéropostale, Inc. (NYSE: ARO) provided a business update in which it announces plans to institute a new cost reduction program, and in which it reiterates fourth quarter guidance.

  • Plans to optimize cost structure – Following a strategic business review, the Company has instituted an aggressive new cost reduction program targeting both direct and indirect spending across the organization. The Company expects this new program to generate approximately $35 million to $40 million in annualized pre-tax savings which is expected to be achieved in fiscal 2016. The Company estimates that it will record pre-tax cash expenses of approximately $1.5 million during fiscal 2015 related to this program.
  • Reduces corporate headcount - As part of its new cost reduction program, Aéropostale plans to reduce corporate headcount by approximately 100 positions, or 13%, by the end of fiscal 2015.
  • Reaffirms fourth quarter 2015 outlook - The Company continues to expect fourth quarter 2015 operating losses in the range of $0.0 million to $10.0 million, which translates to a net loss in the range of $0.04 to $0.17 per diluted share. The effective tax rate for the fourth quarter is still projected to be 0%. This earnings guidance does not include the impact of the aforementioned headcount reductions, and as previously announced, any store impairments, accelerated store closure costs, lease buyout costs, or real estate consulting fees.

Julian R. Geiger, Chief Executive Officer, commented, "The decisions that led to today's actions are a result of our focus on Aéropostale's future, and our goal of returning to profitability. The reiteration of our fourth quarter guidance demonstrates sequential improvement from a sales and operating loss perspective. We are building upon areas of progress and continue to work to improve our business. We look forward to discussing our plans for 2016 on our next earnings call."

In addition to the aforementioned business update, the Company announces that Julian R. Geiger, the Company's Chief Executive Officer, has voluntarily relinquished 1,000,000 stock options, previously granted to him by the Company. These shares will now be utilized by the Company solely for the purposes of motivating and retaining other key members of the organization.

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