NEW YORK (Reuters) — Aeropostale Inc <ARO.N>
is considering raising capital from private equity firms as the
struggling teen retailer evaluates various ways to shore up both its
balance sheet and its share price, four people familiar with the
matter said on Monday.
Aeropostale, which has reported losses for four straight quarters,
faces pressure from investors to sell itself and is working with
investment bank Barclays Plc <BARC.L> to study its options, the
sources said.
If the company decides to raise capital, it may choose to do so in
the form of a private investment in public equity (PIPE) transaction
of a few hundred million dollars, some of the people said.
A PIPE transaction is often used by small and mid-cap companies that
may have difficulty raising capital in public markets. Private
equity firms involved in the deal will typically get stock at a
discount to the public market valuation.
The situation remains fluid, and Aeropostale is considering other
options that may include a sale of the entire company, one of the
people said.
All the people requested anonymity because the situation is private.
Aeropostale was not immediately available for comment. Barclays
declined to comment.
Retailers like Aeropostale, Abercrombie & Fitch Co <ANF.N> and
American Eagle Outfitters Inc <AEO.N>, which focus on selling
apparel to teenagers, are struggling to keep up with the changing
tastes of young shoppers.
Disappointed with Aeropostale's performance, investors have driven
the company's shares down 50.3 percent in the last 12 months to
their lowest levels since 2003. The Standard & Poor's 500 Index
<.INX> has risen 19 percent in the last year.
The company has also been burning through cash quickly. Aeropostale
had working capital of $166.7 million as of November 2, down from
$193.9 million on August 3, while its cash fell to $68 million from
$100.3 million. It also has a $175 million credit facility it has
not drawn on.
For the quarter ended November 2, Aeropostale reported a net loss of
$25.6 million, or 33 cents per share. Sales fell 15 percent to
$514.6 million, below the analysts' average estimate of $520.2
million.
Activist investor Crescendo Partners in November urged Aeropostale
to sell itself.
Private equity firm Sycamore Partners, which is run by retail
veteran Stefan Kaluzny, separately took an 8 percent stake in
Aeropostale in September, becoming its third-largest shareholder.
Sycamore's intentions for its investment still remain unclear. The
firm may ultimately try to buy the entire company or may just want
to pressure Aeropostale to consider alternatives, one of the people
said. Sycamore declined to comment.
(Additional reporting by Greg
Roumeliotis in New York; editing by Lisa Von Ahn)
