Report: Aeropostale launching strategic review as struggles continue

Dive Brief:

Teen apparel retailer Aeropostale is considering a restructuring or sale, sources have told Bloomberg.
The company has hired law firm Weil Gotshal & Manges LLP and financial adviser FTI Consulting as well as Stifel Financial Corp. explore its possibilities, the sources said.
The retailer's fortunes are complicated by its dispute with lender Sycamore Partners over its supply chain, where the retailer says Sycamore is violating a supplier agreement and that the hold-up could cost millions. Aeropostale said it would delay its annual report filing because of the dispute and review.

Dive Insight:

Aeropostale hasn’t eked out the kind of positive results reported by rivals Abercrombie & Fitch and American Eagle Outfitters, which have signaled a strong turnaround. All three retailers are still facing increased competition from fast-fashion and online, declining mall traffic, and a shifting preference to spending on experiences rather than clothes, especially in its target millennial demographic.

Merchandising changes have enabled Abercrombie and American Eagle to ease up on heavy discounting in addition to selling more. Both have gone away from the logo-heavy looks from the '90s, instead focusing on quality and decreasing inventory levels. American Eagle found success in upping the quality of its jeans, while Abercrombie has taken a more adult approach to merchandising recently.

Last month Aeropostale reported that Q4 same-store sales, which includes e-commerce, fell 6.7% year over year, a stark contrast to the rebounds seen at rivals Abercrombie & Fitch and American Eagle Outfitters. The company closed 13 stores in the fourth quarter, while net sales decreased 16.1% to $498 million, from $593.8 million year over year, missing estimates of a net loss of $519.69 million.

The retailer also announced then that it was exploring strategic alternatives, with the board authorizing management to look into a sale or restructuring of the company. Aeropostale's shares at the time plummeted as much as 54% on the news.

Aeropostale's strategy has been to focus on essentials, CEO Julian Geiger said, with the goal to provide teens with a basic "uniform" of T-shirts and jeans, which includes rolling out Factory Stores that carry this apparel.