Analysts at Stifel believe more changes are necessary at Aeropostale

Analysts at Stifel believe more changes are necessary at Aeropostale

More changes are required at Aeropostale if the teen apparel retailer is to update and reposition its merchandise so that it resonates with consumers, analysts have warned.

Analysts at Stifel say the teen apparel retailer's historically successful promotionally priced logo tees, hoodies and denim no longer appeal to its teen customers - but that although improved, the group's efforts to introduce a more fashionable and trend-right assortment has proven very difficult.

"Despite a new advertising campaign and improved brand perception, traffic and conversion rates remain weak, evidence to us that the company's merchandise assortment is not resonating with consumers," they note.

In addition, Aeropostale is accelerating the closure of underperforming stores - it plans to shutter 175 stores over the next few years, representing around 20% of its namesake brand's store base.

The company has also rolled out various initiatives such as store specific inventory allocation, improved fixtures to better highlight the fashion merchandise, and selective increases in store labour to better serve the customer.

The analysts argue that if the merchandise was on-trend, and weak traffic was instead driving the poor results, the retailer would expect to see an improvement in conversion rates. But this is not the case, they believe, with conversion rates running negative and in-line with recent trends.

"We believe the reward potential is limited near term and risk remains significant, given the current fashion, merchandising, and retail consumer challenges."