Sycamore Fund, through its indirectly owned firm, Hummingbird LLC, acquired 6.25 million shares of a 7.9 percent stake in Aeropostale Inc (NYSE:ARO) based on its 13D filing with the Securities and Exchange Commission (SEC).
Sycamore Funds find Aeropostale attractive
According to Hummingbird, Aeropostale Inc (NYSE:ARO) is “an attractive investment.” It indicated that it may engage in a discussion with the board and management of the teen apparel retailer regarding the company’s assets, business strategy, future plans and other issues.
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Hummingbird’s investment in Aeropostale Inc (NYSE:ARO) is worth $53,971, 225 (excluding brokerage commissions) and the funds came from the capital commitments of the partners of Sycamore Funds.
Earlier this year, Sycamore Partners acquired Hot Topic, Inc (NASDAQ:HOTT), retailer of music-inspired and pop culture-inspired apparel and accessories for $600 million. The firm’s investments demonstrate that it is focused on the teen retail industry. Sycamore Partners also purchased Talbot’s for nearly $400 million.
Aeropostale stocks surge
The stock price of Aeropostale Inc (NYSE:ARO) surged by more than 18 percent to $10.23 per share around 1:29 in the afternoon in New York. The teen apparel retailer is currently facing challenges to increase sales particularly its graphic T-shirts and fleeces. The company is trying to make improvements by integrating more fashion into its products.
During the second quarter, financial results from Aeropostale Inc (NYSE:ARO) were disappointing. The company posted $454 million sales, a decline of 6 percent from its previous sales of $485.3 million in the same period a year earlier. Its comparable sales dropped by 15 percent during the period.
Aeropostale expected to suffer losses
The company incurred a net loss of $33.7 million or $0.43 per diluted share due to challenging teen retail environment, high level of promotional activity, and weak traffic trends. For its third quarter guidance, Aeropostale Inc (NYSE:ARO) expected to suffer another net loss of $0.21 to $0.26 per diluted share.
“Our negative outlook for the third quarter reflects the challenges of a highly promotional and competitive teen retail environment which we expect will continue. As we navigate the current environment, we will continue to focus on our strategic initiatives of further refining our merchandise mix and communicating the changes we have made to our brand through marketing. We are committed to turning our business around and remain focused on shifting brand perception and recapturing market share,” stated Thomas Johnson, CEO of Aeropostale Inc (NYSE:ARO).