Aeropostale is aiming to save US$30-35m a year through cost-cutting measures

Aeropostale is aiming to save US$30-35m a year through cost-cutting measures

Retailer Aeropostale is aiming to save US$30-35m a year through cost-cutting measures including the closure of 125 stores and 100 further job losses - although analysts are warning the measures might not go far enough.

The company said it would save $5-10m in fiscal 2014 from plans to close 125 mall-based PS from Aeropostale stores by the end of the fiscal year – part of a restructuring to focus PS on off-mall locations, e-commerce and international licensing.

The plan would also target direct and indirect spending across the organisation, the US company said, including the reduction of its corporate headcount by 100, on top of job losses from its ongoing store closure programme.

The move will generate charges of $40-65m in fiscal 2014.

“The steps we are announcing today build on our turnaround efforts from the past year,” said Thomas Johnson, CEO.

“Through the restructuring of our PS from Aeropostale brand, and expansion of our expense savings programme, we will be better positioned financially and have laid the groundwork for the future.”

The company expects to generate a first quarter net loss of about $0.70-0.75 per diluted share, excluding the impact of the cost-saving measures.

"We view these restructuring steps as positive, although we believe more changes, including accelerated store rationalisation, increased fashion accuracy, additional emphasis on e-commerce growth, are likely necessary to further the turnaround," says analyst Susan Anderson at FBR Capital Markets.

And while Richard Jaffe, analyst at Stifel, Nicolaus & Company, describes the latest measures as "good defensive moves," he also believes that product is key.

"Playing good defense does little to improve the appeal of the merchandise. The challenge is clear: offer the consumer compelling merchandise at the right value proposition.

"ARO management, facing the need to update and reposition its merchandise offering, has struggled. Its historically successful business of promotionally priced logo tees, hoodies, and denim has lost its appeal with the company's teen customers.

"ARO's efforts to introduce a more fashionable and trend-right assortment has proven very difficult."