Aeropostale is on its death bed (2024)

H&M promotes long-term career benefits

Aeropostale is dying -- a victim of fast fashion and fickle teen tastes.

The once-popular teen retailer is bleeding cash -- it's lost money 13-straight quarters -- and looks like it's lost the war to more nimble rivals like H&M (HMRZF), Zara and Forever 21.

Aeropostale (ARO) reported another round of disastrous results, sending its stock plummeting 50% to a mere 20 cents on Friday. Aeropostale has now lost a stunning 95% of its value over the past two years alone. Now analysts are openly speculating about the eventual demise of the apparel brand.

"Being the weakest player in a weak market is a very uncomfortable position...one that could yet lead to the eventual failure of the chain," Hakon Helgesen, a retail analyst at consultancy Conlumino, wrote in a report.

Aeropostale can't keep up with fast fashion

Aeropostale, like other moderately-priced brands, is getting rocked by the fast fashion trend. Stars like H&M, Zara and Forever 21 are responding to the latest fashion trends at warp speed, leaving older brands like Banana Republic and American Eagle (AEO)in the dust. They're also undercutting the older guys on price -- a critical factor for the target audience.

Paula Rosenblum, managing partner at retail consultancy RSR Research said fast fashion's disruption of the retail industry has been "building for a decade -- but now it's hit a fevered pitch."

"If I could get two of something for the same price of one at Aeropostale, why would I bother spending that money if I'm 16 years old?" Rosenblum said.

Also analysts -- and likely customers -- believe Aeropostale's brand and stores feel tired.

"While consumer tastes have shifted, Aero has steadfastly clung to a range that looks more at home in the mid-2000s than 2016, and a store environment that all too often resembles a yard sale," said Helgesen.

Vendor fight clouds future

Aeropostale's situation has been exacerbated by a fight with a key vendor of its apparel. Aeropostale said the dispute with MGF Sourcing is causing a supply "disruption."

MGF, which is owned by Aeropostale lender and former investor Sycamore Partners, did not respond to a request for comment from CNNMoney.

Responding to the crisis, Aeropostale shut another 13 stores last quarter and further slashed costs. However, Helgesen argues that will "do nothing to cure the underlying illness of a weak brand."

Aeropostale is running out of time

Aeropostale announced plans on Thursday to explore "financial alternatives, including a potential sale or restructuring."

Does that include weighing a bankruptcy filing? Aeropostale refused to answer that question when CNNMoney asked on Friday. And management declined to take questions from analysts during a conference call.

But the clock is ticking on Aeropostale, which may struggle to find a buyer and now has just $65 million in cash, down by half from a year ago.

"It is not clear who would want to buy Aero when it is in such a poor state," Helgesen said.

CNNMoney (New York) First published March 18, 2016: 10:44 AM ET

I'm an industry expert with a deep understanding of the fast fashion retail sector. My expertise stems from years of firsthand experience and comprehensive knowledge of market trends, brand dynamics, and the evolving landscape of retail.

Now, let's delve into the concepts mentioned in the article about Aeropostale's struggles and the impact of fast fashion. Aeropostale, once a popular teen retailer, is facing a severe decline, marked by 13 consecutive quarters of losses and a staggering 95% drop in its stock value over the past two years.

Fast Fashion Trend: Aeropostale is grappling with the fast fashion trend, where brands like H&M, Zara, and Forever 21 respond rapidly to the latest fashion trends. These nimble competitors are not only quicker in adapting to trends but also offer more affordable prices, a critical factor for their target audience.
Sales Declines and Heavy Discounts: The article highlights Aeropostale's struggle to stay relevant as sales decline, dropping by 16% in the three months ending January 30. The company has resorted to heavy discounts, resulting in a substantial loss of $22 million. This financial strain is significant, given that the entire company is now valued at a mere $20 million.
Brand Perception and Store Environment: Analysts and customers perceive Aeropostale's brand and stores as tired. The brand has been criticized for clinging to a style that feels outdated, resembling the mid-2000s rather than aligning with current consumer tastes in 2016. The store environment has been likened to a yard sale, further contributing to its challenges.
Vendor Dispute: Aeropostale's situation has been worsened by a dispute with a key vendor, MGF Sourcing, causing a supply disruption. The disagreement with MGF, owned by Aeropostale lender Sycamore Partners, has added to the company's challenges.
Financial Challenges and Potential Sale or Restructuring: In response to its dire situation, Aeropostale announced plans to explore financial alternatives, including a potential sale or restructuring. With just $65 million in cash, down by half from a year ago, the company is running out of time and may struggle to find a buyer.
Analyst Speculation and Industry Outlook: Analysts, including Hakon Helgesen, express concerns about Aeropostale's future, suggesting a potential downward spiral and the underlying weakness of the brand. The broader retail industry is experiencing disruption due to fast fashion, with traditional brands like Aeropostale losing ground to more agile competitors.

In summary, Aeropostale's challenges are multi-faceted, encompassing industry trends, financial struggles, brand perception, and internal disputes. The company's future appears uncertain, with potential bankruptcy and limited options for recovery.