Aeropostale To Close 125 Mall-based P.S., To Cut 100 Jobs; Stock Rises

(RTTNews) - Aeropostale Inc. (ARO), a mall-based specialty retailer of casual apparel for young women and men, Wednesday announced a comprehensive cost reduction program, that includes the closure of some stores as well as elimination of 100 positions. The stock gained more than 3 percent in the extended trade.

Following a strategic business review, Aeropostale has identified key initiatives that are estimated to generate $30 million to $35 million in annualized pre-tax savings, of which $5 million to $10 million is expected to be achieved in fiscal 2014.

The company has decided to close 125 mall-based P.S. from Aeropostale stores by the end of fiscal 2014. The retailer plans to restructure the brand to focus on faster growing sales channels, including off-mall locations, e-commerce and international licensing. The company is also exploring potential third party distribution channels.

These steps are expected to eliminate pre-tax losses of $15 million that were generated in the mall-based business in fiscal 2013, excluding any impairment charges.

Further, 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 around 100 positions to align with current business strategies. This is in addition to the workforce reductions from the company's on-going store closure program.

The company estimates to record pre-tax restructuring, asset impairment, and other charges of $40 million to $65 million during fiscal 2014 related to these actions, of which $25 million to $40 million are estimated to be cash expenses.

Thomas Johnson, Chief Executive Officer of Aeropostale, said, "Through the restructuring of our P.S. from Aeropostale brand, and expansion of our expense savings program, we will be better positioned financially and have laid the groundwork for the future.''

Global business advisory firm, AlixPartners LLP, served as advisor during the company's strategic business review process. The company continues to work with real estate consultants to optimize its real estate portfolio.

Further, the retailer said it continues to expect first-quarter 2014 operating loss in the range of $64 million to $68 million, which translates to a net loss of $0.70 to $0.75 per share. This outlook excludes the impact of the strategic initiatives announced today, as well as any expected consulting fees associated with these announcements.

On average, 25 analysts polled by Thomson Reuters expect a loss of $0.72 per share for the quarter. Analysts' estimates typically exclude special items.

ARO closed up 0.2 percent on Wednesday at $4.97, and rose 3.4 percent in the extended trade.