Despite it name, Aéropostale is more mall-based than mail-based. It operates more than 800 mostly mall-based stores under the Aéropostale and P.S. from Aéropostale (for kids) banners in 50 US states, Puerto Rico, and Canada. It stocks the usual teen outerwear (jeans, T-shirts, accessories), mostly under the Aéropostale and Aéro names. The retailer designs and sources its own merchandise so that it can quickly respond to trends, but has been struggling in a competitive environment in the aftermath of the US recession. In 2016, Aéropostale filed for Chapter 11 bankruptcy protection.
Change in Company Type
In 2016, the company was delisted from the New York Stock Exchange and the company began trading on the OTCQX Best Market under the symbol AROP.
As part of its financial restructuring efforts, the chain will close 113 US stores and all 41 stores in Canada. Aéropostale lost money for 13 straight quarters before entering bankruptcy proceedings. The firm expects the bankruptcy to be a relatively brief six-month stint. It is also seeking potential buyers. In June 2016, the company received United States Bankruptcy Court for the Southern District of New York has given final approval for the Company to access $160 million in debtor in-possession (DIP) financing provided by Crystal Financial LLC
The company serves young women and men through its Aéropostale and Aéropostale Factory stores and website and 4 to 12 year-olds through its P.S. from Aéropostale stores and website.
It locates its stores primarily in shopping malls, outlet centers and, to a much lesser degree, lifestyle and off-mall shopping centers.
In addition to its main Aéropostale chain, the retailer operates P.S. from Aéropostale, a casual-apparel chain for kids between the ages of 4 and 12. P.S. from Aéropostale operates about two dozen stores in a dozen US states. The company also operates the GoJane.com website, based in Ontario, California.
Aéropostale rang up 95% of its revenue in fiscal 2016 (ended January) in the US. The remainder came from Canada, where it operated about 40 shops nationwide. Beyond North America, licensees operate about 320 Aéropostale and P.S. from Aéropostale shops in Europe, the Middle East, and Latin America.
Sales and Marketing
Aéropostale leases a 315,000 square foot distribution center facility in South River, New Jersey. It also leases a second distribution facility in Ontario, California with 360,000 square feet of space. The company has an agreement with a third party to perform distribution services for Aéropostale stores in Canada.
The company's external marketing costs, which include e-commerce, print, radio and other media advertising, were $22.4 million in fiscal 2015, and $26.7 million in fiscal 2014.
Historically a high flier on the youth fashion scene, Aéropostale has seen sales, net income, and cash from operations drop significantly since fiscal 2013 as it struggles with declines in mall traffic, the changing tastes of teens, and intense competition (from the likes of
Abercrombie & Fitch
, among others). It reported fiscal 2016 revenue of $1.5 billion, down 18% from the prior year, as the company closed nearly 50 stores as part of its turnaround efforts and also decreased due to decline in comparable sales, non-comparable sales and international licensing revenues. Consolidated comparable sales, including the e-commerce channel, decreased by 11% in its young men's and by 7% in its young women's category.
Aéropostale has recorded a net loss for the past three years, with a 2016 loss of about $137 million. The company saw 34% decline in net loss in 2016 due to a drop in operating expenses which included lower selling, general and administrative expenses due in part to the closure of stores during fiscal 2015 and expense savings initiatives. It also received restructuring benefit due to reversals of exit cost obligation liabilities resulting from subsequent lease terminations.
Unsurprisingly, cash from operations has followed the same trend, dropping to a negative $68 million in fiscal 2016 from a negative $56 million the year before.
The retailer is looking to off-mall locations, e-commerce, and international licensing to drive sales growth as it shutters a substantial number of its traditional mall-based locations. Aéropostale saw a lot of activity in its international licensing segment in fiscal 2015 with new markets Chile, Malaysia, and Mexico; Through a licensing agreement with Shuz 4 U International Ltd., Aéropostale opened its first store in Dublin, Ireland in 2015. Turkey is also on the company's plan for expansion, and it has plans for licensed locations in Thailand and Egypt within the next five years. The company also has expansion plans throughout Asia with new licensing agreements in India and Indonesia. The company plans to open stores in India through a licensing agreement with Arvind Lifestyle Brands Limited, and in Indonesia through a licensing agreement with PT Mitra Adiperkasa TBK (MAP).
To spur sales, Aéropostale is repositioning the brand and working to improve its merchandise and marketing. (It's interesting to note that the chain enjoyed double-digit sales increases during the deep recession, while pricier retailers, notably rival Abercrombie, suffered. Now with the economy improving, value-priced Aéropostale is struggling a bit.)
In 2016, the company planned a Factory and Mall Strategies to improve its financials, pursuant to which the company divided its store base into two groups, the Factory Chain and the Mall Chain, based on several factors including customer demographics and store performance. The Factory Chain attracts customers interested in purchasing more basic items at a competitive price while the Mall Chain attracts customers focused on buying fashion merchandise.
The Factory channel (60% of the store base), caters to families, as well as young women and men. The Mall Chain stores (40%) are primarily located in higher-end, or A and B, malls.
In an effort to right size its store base and optimize itsreal estate portfolio, the company closed 50 stores in the US and Canada during fiscal 2015. It closed 122 Aéropostale stores in the US and Canada during fiscal 2014. During fiscal 2016, Aéropostale closed 6 locations and, in connection with its Chapter 11 filing, it announced that it was closing an additional 113 US locations, as well as all 41 stores in Canada.
The Aéropostale name originated from a 1920s airmail firm, Compagnie Generale Aéropostale. The brand was created by R.H. Macy & Co. as a private label in the 1980s and later became a specialty store concept.