US: Aeropostale fails to end shareholder lawsuit
Aeropostale has failed in a bid to dismiss a lawsuit accusing the US retailer of defrauding shareholders in 2011 by hiding problems with excess inventory and weak sales, which hit its share price.
U.S. District Judge Colleen McMahon had raised a strong inference that the retailer's management issued guidance that was "overly rosy and highly unlikely".
The difficulties came as the brand attempted to focus on a more mature consumer, which led to severe inventory issues and high levels of discounting.
According to the City of Providence, which brought the lawsuit, as the truth became known, Aeropostale's stock price slid more than 50% between 5 May 2011 and 4 August 2011.
McMahon, of the Southern District Court of New York, found that the plaintiffs showed that Aeropostale's management knew they had made a "huge merchandising mistake" and set about correcting it. And given that the company orders clothing six to nine months in advance, it would have been impossible to rectify an excess inventory problem in one or two quarters.
The complaint alleges that while the retailer admitted to being more promotional to offload excess winter stock after the holiday period in 2010, it should have been able to "surmise relatively early in the spring selling season that the spring line was going to be no more successful than the winter line had been".
However, the group's forward looking statements implied that the lower earnings were the result of a temporary inventory problem that would be resolved imminently, without saying that it anticipated the problem might extend into following quarters as the unpopular designs had been pre-ordered and would continue to be stocked until autumn 2011.
The plaintiff now has 30 days to move for class certification.
US clothing retailer Aeropostale is forecasting a third quarter net loss and has extended store closure plans after the group swung to a second quarter loss. ...
Aeropostale has said the teen clothing retailer expects to post a third quarter loss and close more stores than originally forecast, after high promotional activity weighed on second quarter sales and...
US teen clothing retailer Aeropostale has lowered its second quarter expectations after worse than expected sales over the period. ...
- US apparel retailers' January 2016 sales roundup
- Esquel backs Chinese Sea Island cotton production
- TPP trade pact in milestone signing by 12 nations
- US apparel import growth led by Bangladesh
- Cheap polyester contributes to cotton import shift
- Southeast Asia – a strategic sourcing review
- Bangladesh factory fire renews worker safety fears
- Eco-friendly garment factory opens in Bangladesh
- Hanesbrands Q4 performance “disappoints”
- H&M and Primark price rivalry reaches equilibrium
- Southeast Asia strategic sourcing review – a focus on Cambodia, Vietnam and Myanmar
- Wearable technology: The future market potential for smart garments and e-textiles
- Global market review of denim and jeanswear – forecasts to 2021
- Wearable Technology Market by Product, Application, Type, & Geography - Global Forecast to 2020
- E-Textiles: Electronic Textiles 2014-2024