‘AERO’ NOT SO STALE
Stock pops on deal
Aeropostale’s investors may be even more fickle than its customers.
Shares of the mallbased teen retailer soared 15 percent Tuesday on news of a fresh financing deal — just one day after they’d dropped 24 percent on disappointing results.
The struggling chain said it has secured a $150 million credit facility from Sycamore Partners, a New York buyout firm that lately has acquired downandout retail brands like Hot Topic and Talbots.
While the financing deal had already been announced in March, news of its consummation came as a relief to investors after the company reported its sixth straight quarterly loss last week amid falling sales.
“The deal with Sycamore eliminates the most significant risk factor over the next 12 months — liquidity,” Piper Jaffray analyst Stephanie Wissink wrote in a note to clients.
“At the current [cash] burn rate, this contribution buys Aeropostale another 6 to 12 months of operating cash,” she wrote.
Aeropostale shares, down 62 percent in 2014 as of Friday, closed Tuesday at $3.92.
The cash infusion comes as teen retailers across the board have been slammed by stiff competition and dwindling mall traffic. Sales have heated up in recent weeks with the arrival of warmer weather, but the unusually long winter saddled them with mounds of unsold inventory.
“Despite a sales rebound in [the second quarter], we believe margins might be under pressure,” Stifel analyst Richard Jaffe warned clients in a Tuesday research note.
Aeropostale ended its first quarter with just $24.5 million in cash, its lowest since 2000, according to Cowen & Co analyst John Kernan.
Sycamore cofounder Stefan Kaluzny, a voracious dealmaker who has intrigued Wall Street with his risky bets, will become an Aeropostale director, the company said Tuesday.
The board will also see the return of former Chairman and CEO Julian Geiger, who was widely credited with building Aeropostale a decade earlier.
Aeropostale said it issued convertible preferred stock to Sycamore, giving it the right to acquire up to a 5 percent stake at an exercise price of $7.25, the closing of the retailer’s stock on March 12.
Sycamore had a 7.96 percent stake in Aeropostale as of March 13.