Aeropostale Trouble Risks 3,000 Jobs

The tattered turnaround at Aeropostale Inc. (NYSE: ARO) just ended. The company has put itself up for sale. Its financials and lack of customers could undercut that effort. Over 3,000 jobs are at risk.

According to Aeropostale, it is a tiny retailer:

The Company currently operates 744 Aéropostale® stores in 50 states and Puerto Rico, 41 Aéropostale stores in Canada and 25 P.S. from Aéropostale® stores in 12 states. In addition, pursuant to various licensing agreements, the Company’s licensees currently operate 322 Aéropostale® and P.S. from Aéropostale® locations in the Middle East, Asia, Europe, and Latin America.  Since November 2012, Aéropostale, Inc. has operated, an online women’s fashion footwear and apparel retailer.

It takes nearly 3,300 people to operate and manage the business. The details of its current financial situation are gloomy. In the quarter that ended January 30, revenue dropped to $498 million from $694 million in the same period a year ago. The company lost $22 million, compared to a loss of $14 million the year before. The number that shocked investors was same-store sales, which dropped 6.7%, on top of a plunge of 8.5% in the period a year earlier.

It is not clear why Aeropostale has not cut its store count by half. The decision not to could be a blunder. However, the company may lack enough money to pay leases on shuttered locations, and the severance that would be part of the process.

As it announced earnings, management added:

The Board of Directors of Aéropostale has authorized management to explore a full range of strategic and financial alternatives, including a potential sale or restructuring of the Company. The Company has retained Stifel and other advisors to assist in a review of alternatives.

Wall Street showed its extreme pessimism about the plan charted for Aeropostale’s future. Shares fell 45% to $0.26 on Friday. The company’s market cap now is only about $20 million.

One theory about the future of Aeropostale is that all retailers have a buyer, no matter how crippled a company is. That is not true. To take on a retailer with such rapidly dropping sales assumes that new management would be much more skilled than the current one, and that a obliterated brand can be repaired quickly. Neither of those things is likely to happen, which puts over 3,000 jobs at risk.