Teen apparel retailer Aeropostale was delisted from the New York Stock Exchange (NYSE) on the morning of April 22 after reports of the company planning to file for bankruptcy later this month led to a big drop in share prices. Aeropostale quickly made a statement on the suspension of trade, saying that the clothing company “does not intend to appeal the delisting determination.”
Aéropostale has been delisted from the New York Stock Exchange https://t.co/Sf4pMGT6lT
— Fortune (@FortuneMagazine) April 22, 2016
The company had received delisting notification as early as November 2015, which means it didn’t really take Aeropostale by surprise. Shares of Aeropostale slid hard on Thursday amid bankruptcy rumors, going down 27.7 percent on closing with a per share price of just $0.15, which is below NYSE’s requirements.
Aeropostale’s share prices had been at an all-time high of $29.90 in July 2010, meaning that the company lost 95 percent of its value in just over five years. Even on September 2015, Aeropostale had already announced that they were at risk of being delisted due to share price already being below $1 at that point.
While it is no longer trading in NYSE, Aeropostale will begin trading on the over-the-counter OTCQX Best Market on April 29 under the symbol “AROP.” The over-the-counter markets are colloquially known as the “pink sheets”—where only the bravest and craziest of investors would ever dare to put their money in.
This development will make it harder for the company to earn more capital in order to somehow bounce back. Aeropostale joins the likes of Abercrombie & Fitch and American Eagle Outfitters as clothing retailers who have been overtaken by fast fashion brands such as H&M and Forever 21 in recent years. By still trading publicly, Aeropostale must somehow be able to get shoppers back or be bought out and go private.
Aeropostale had been in dispute with its top backer Sycamore Partners as well. The private equity firm had bought a big stake in Aeropostale back in 2013 and loaned the clothing company $150 million in 2014 in an effort to breathe new life into the struggling retailer. It’s clear that the investment didn’t pay off well, and it’s now being speculated that Sycamore may soon push to acquire the rest of Aeropostale.
However, while Aeropostale had been considered one of the most eligible leveraged-buyout (LBO) candidates in the retail industry, LBOs of publicly traded companies are now sparse at best. Perhaps the only hope for Aeropostale at this point as a public company is to attract investors who are willing to risk it on the company somehow making a comeback, especially since Aeropostale stocks are now at a bargain price.
Sycamore Partners had facilitated a strategic partnership between Aeropostale and fellow board member MGF Sourcing, a clothing supplier. However, due to Aeropostale’s growing troubles, MGF has been making its displeasure known by disrupting supply of merchandise and violating terms of agreement seemingly deliberately. The delays could cost the already ailing company up to an additional $8 million loss.
— Business of Fashion (@BoF) April 22, 2016
Due to problems with MGF, Aeropostale is now looking for an alternative as their main supplier, namely the Hong Kong-based Li & Fung Ltd. A 10-year sourcing agreement with Li & Fung had been renewed more than a year ago, which may be a sign that it may soon be ditching MGF Sourcing. With the shipping delays tightening the noose, the move may indeed be both desperate and wise given the circumstances.
Aeropostale had fallen out of favor with teen shoppers over the years, and the steady decline in mall traffic has done much to dampen the sales of the mall-based clothing retailer. The New York-based clothing retailer had announced earlier in the year a belt-tightening campaign, cutting expenses by up to $40 million and laying off 13 percent of its corporate staff. Aeropostale was once worth $2.6 billion, but it’s now down to $14.4 million.
[Photo by AP Photo/Mark Lennihan, File]