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Aeropostale to receive $150 million financing from Sycamore Partners; Q4 loss widens

New York -- Aeropostale on Thursday announced it has signed an agreement with private equity firm Sycamore Partners for $150 million in financing and a strategic partnership. The teen retailer also reported its fifth straight quarterly loss amid a 15% decline in same-store sales, and announced it will close 50 stores in 2014.

Sycamore will provide Aeropostale with a five-year $100 million term loan facility, and a ten-year $50 million term loan facility that includes a sourcing arrangement with MGF Sourcing, an affiliate of Sycamore.

Under the terms of the commitment letter, Aeropostale will also issue convertible preferred stock to Sycamore. The convertible stock gives Sycamore the right to acquire up to 5% of the company's common stock at an exercise price of $7.25. Combined with Sycamore’s current ownership of Aeropostale's outstanding common stock, the firm would own 12.3% of Aeropostale’s outstanding common stock.

As part of the agreement, Stefan Kaluzny, a managing director at Sycamore, will join Aeropostale's board of directors on the closing of the transaction. In addition to Kaluzny, Sycamore will receive the right to appoint one additional member to the board, with a third independent appointee to be mutually agreed upon by Aeropostale and Sycamore. The board will increase from 11 to 12 members.

Thomas P. Johnson, CEO of Aeropostale, commented: "We look forward to working with Stefan and the Sycamore Partners team, and to the valuable retail and operational expertise they bring to Aeropostale. The terms of our commitment letter with Sycamore Partners are very attractive and provide us with significantly improved financial flexibility backed by their substantial knowledge of the retail industry. Once the arrangement is in place, we will have additional runway to continue to implement our merchandising, marketing and operational strategies designed to reposition the Aeropostale brand.”

Aeropostale reported a net loss of $70.3 million in the fourth quarter ended Feb. 1, wider than a loss of $671,000 in the year-ago period.  Net sales fell 16% to $670 million. Same-store sales, including online sales, decreased 15%.

Net sales for fiscal 2013 decreased 12% to $2.091 billion. Same-store sales, including the e-commerce channel, decreased 15%.

Aeropostale said it plans to close about 50 Aeropostale stores and two P.S. stores in 2014.  It has retained a real estate consulting firm to advise on accelerating the pace of closures, and to identify other rent-saving actions.

 

© 2014