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Aeropostale Inc (OTCMKTS:AROP) Hits The OTC

Aeropostale Inc (OTCMKTS:AROP) Hits The OTC
Written by
Alex Carlson
Published on
April 25, 2016
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Shares of Aeropostale Inc (OTCMKTS:AROP) hit the OTC last week after the company chose not to fight the NYSE over its delisting. Earlier in the week, Bloomberg reported that the teen retailer was close to filing for bankruptcy. According to sources, Aeropostale is trying to work out a loan to finance its operations during the bankruptcy process and then file Chapter 11. However, since the company has not filed yet, there is still the opportunity to avert bankruptcy in the event that the company can cut a deal with a buyer. This is what OTC investors are banking on.Like many teen retailers, Aeropostale has been the victim of a series of missteps in catering to this fickle demographic. If a company like Aeropostale cannot stay on top of the latest fashion trends, they become yesterday’s news. Teens are not like moms who tend to remain loyal to their favorite stores and brands. Even still, many of Aeropostale’s problems have been self-inflicted. A series of management missteps remain at the heart of the company’s problems.Aeropostale is a specialty retailer of casual apparel and accessories, principally targeting young women and men through its Aéropostale stores and website and 4 to 12 year-olds through its P.S. from Aéropostale stores and website. The company provides customers with a focused selection of high quality fashion and fashion basic merchandise at compelling values in an exciting and customer friendly store environment. Aéropostale maintains control over its proprietary brands by designing, sourcing, marketing and selling all of its own merchandise, other than in licensed stores. Aeropostale currently operates more than 800 stores. A bankruptcy filing would allow the retailer to get out of some of its leases and close underperforming stores.Aeropostale has also delayed filing its annual report as it mulls its options. For the fourth quarter of fiscal 2015, net sales decreased 16.1% to $498.0 million, from $593.8 million in the year ago period. Comparable sales, including the e-commerce channel, for the fourth quarter decreased 6.7% compared to the fourth quarter of fiscal 2014. The Company reported a net loss for the fourth quarter of fiscal 2015 of $21.7 million, or $0.27 per diluted share compared to a net loss of $13.5 million, or $0.17 per diluted share last year.The retailer is also in a dispute with Sycamore Partners, which has lent the company $150 million and is also Aeropostale’s chief supplier. This is really the last thing the company should be doing at this stage. Worth noting is that Sycamore Partners has been feasting on the carcasses of beleaguered retailers and has bought Talbot’s, Hot Topic and Coldwater Creek.Aeropostale is sitting on $65.1 million in cash. The current portion of long-term debt was $5.0 million and non-current long-term debt was $138.0 million. Additionally, there were no borrowings outstanding under the revolving credit facility and the company was in compliance with all financial covenants associated with the revolving credit facility and loan agreement. Aeropostale has tapped Stifel Financial Corp, Weil Gotshal & Manges LLP and FTI Consulting to help assess a possible sale or restructuring.Right now, the question on everyone's mind is what's next. For OTC investors, they look at shares of Aeropostale between five and ten cents as a lotto ticket. Either you lose everything or the stock bounces hard and turns into a microcap runner and a multi-bagger. Chances are the company will declare bankruptcy so we recommend investors to trade the shares and to not be left holding the bag. We will be updating Insider Financial as soon as we know more. For continuing coverage on AROP, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in AROP and have not been compensated for this article.

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