Ailing Aeropostale gets $150mil from new investment partner, appoints new board members

Ailing Aeropostale gets $150mil from new investment partner, appoints new board members

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Wall Street has been enamored with Fifth Avenue’s high-growth speciality retail and consumer businesses of late, and Sycamore Partners is only the latest in a long line of deep-pocketed suitors angling for the industry.  Whether this arrangement can turn around a brand caught in the throes of “seismic” youth culture shifts  and oft-described as  “cheap, immature, juvenile knock-off of other recognized brands” is another matter altogether.

Aeropostale has been desperate to make waves among their core youth market buyers.  Pinning their hopes to YouTube fashionistas and a total brand overhaul, ARO (their stock ticker symbol) has explored every possible path to atone for a series of earnings misses and a record-low stock price, to no avail.  Enter $3 billion juggernaut Sycamore Partners with a $150 million strategic partnership offering desperately needed capital for an immediate repositioning.  With clouds surrounding the possible future of ARO, this move staves off the rumor mill for the time being.

“Principally targeting 14 to 17 year-old young women and men through its Aeropostale stores and 4 to 12 year-old kids through its P.S. from Aeropostale® stores” per their corporate bio, ARO has lost cachet with it’s coveted Gen Z clientele.  Few if any have succeeded in reconnecting a brand, once damaged, with teen buyers.  Sycamore’s capital infusion, while timely, comes with a great deal of fine print.

ARO agreed to $150 million in the form of loans while also signing on to do their product sourcing for the next ten years through a business partner of Sycamore.  Drastic changes to the management team also came as part of the deal.  Aeropostale has appointed Stefan Kaluzny, Managing Director at Sycamore Partners, and Julian Geiger, former Director and Chief Executive Officer of Crumbs Bake Shop to their board.  Notably, Geiger is also the former Chairman and CEO of ARO, signaling a shift back to the brand’s strategy of yesteryear .  Meanwhile, director Arthur Rubinfeld has announced that he will be stepping down.  Although these announcements are par-for-the-course as large business partners are keen to seed management with their preferred picks, it is clear Sycamore will be leading the brand’s repositioning.

ARO has a new lifeline as they jettison a business model that is long-in-the-tooth to say the least.  At the outset this strategic partnership will ensure Aeropostale has strong financial efficiencies in place.  Whether there will be benefits to the brand’s reputation and offerings remains to be seen.

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