Aeropostale finds new way to make money

Aeropostale believes its brand is strong enough that shoppers at other retail outlets will want to buy licensed products bearing its name.



The teen specialty retailer and operator of roughly 800 stores signed a domestic licensing agreement for home textiles with Himatsingka America. Terms of the deal call for Himatsingka to design, manufacture and distribute bedding and bath linens using the Aeropostale label for department stores, big-box retailers and wholesale channels across North America.



“We look forward to capitalizing on the power of the Aeropostale brand to expand our reach through new bedding and bath products,” said Julian Geiger, Aeropostale CEO. “Himatsingka America has a strong portfolio of brands and proven track record, and we look forward to working with them to reach new customers across new channels."



Aeropostale needs to reach more customers since sales at its own stores have been weak and losses are mounting. In the second quarter, same-store sales declined 8% on top of a prior year decline of 13%. The comp decline and closure of 23 stores caused total sales to fall 17% to $327 million. The company reported a net loss of $43.7 million, or 55 cents a share.



While Geiger characterized the quarter as, “an important transitional time,” the company has been rejiggering its finances to buy time to restore growth to the once-hot brand. The retailer had cash and equivalents of $86.5 million and $142.7 million in long-term debt at the end of the second quarter. However, it recently closed on a $215 million amended credit facility that doesn’t expire until February 2019.



Despite some financial breathing room, investors aren’t impressed. The company’s share price has traded at less than $1 for more than a month putting it in violation of the New York Stock Exchange listing requirements and prompting discussion of a reverse stock split. Doing so could bring the company in compliance with the NYSE’s listing requirements while it continues to address underlying business issues.

The new relationship with Himatsingka may not provide an immediate benefit to Aeropostale’s financials since product isn’t due to go on sale until the 2016 back to school season. Even then, the impact is unclear since payments under such licensing deals are typically based on achieving sales volume targets.



“We intend to engage Aeropostale's vast customer base with an exciting new home offering. We share their passion for creative design and quality workmanship and look forward to a meaningful relationship,” said David Greenstein, CEO of Himatsingka.