Aeropostale mulls cost reduction as part of turnaround

01 May '14

3 min read

Aeropostale, Inc., a mall-based specialty retailer of casual apparel for young women and men, provided an update on its strategic initiatives and announced a comprehensive cost reduction program as part of the Company's on-going turnaround plans.

Following a strategic business review, the Company has identified key initiatives it estimates will generate approximately $30 million to $35 million in annualized pre-tax savings, of which approximately $5 million to $10 million is expected to be achieved in fiscal 2014.

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.

Highlights:

-Plans to Exit Mall-Based Locations of the P.S. from Aeropostale Brand to Focus on Faster Growing Distribution Channels

-Expands Company-Wide Expense Savings Program

-Expects to Generate Total of Approximately $30 Million to $35 Million in Annualized Cost Savings Beginning in 2015

-Reaffirms First Quarter 2014 Outlook

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.

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