Ahead of the Bell: Aeropostale

Aeropostale shares tumble on news of deal, 4Q results, outlook

Associated Press

NEW YORK (AP) -- Aeropostale appeared headed for a new 52-week low in premarket trading Friday after its losses widened and the teen retailer, in exchange for new financing, allowed for a larger chunk of its shares to go the private equity firm Sycamore Partners.

The New York company issued a dismal outlook as well late Thursday and its stock slumped 17 percent before the opening bell.

Aeropostale had posted four consecutive quarterly losses when reports began to circulate in January that it might put itself up for sale.

Under the deal struck with Sycamore, the firm and its affiliates will provide $150 million in loans. In exchange, Sycamore will get convertible preferred stock that gives the firm the right to buy up to 5 percent of the company's stock.

A managing director at Sycamore will join Aeropostale's board and the firm as the authority to appoint another director.

If fully allotted, Sycamore would own roughly 12.3 percent of Aeropostale's outstanding shares, making it the company's second-largest shareholder, according to FactSet.

Jefferies & Co. cut its price target on the retailer's stock by more than 14 percent, to $6.

"The just-announced capital infusion from Sycamore Partners provides a liquidity cushion, but nonetheless, we have extremely low visibility on when a turnaround might occur, despite management's numerous efforts to right the ship," wrote analyst Randal Konik, who maintained a "hold" rating on the stock.

The company's adjusted loss of 35 cents per share was 3 cents worse than Wall Street had expected, according analysts polled by FactSet. Revenue slumped 16 percent to $670 million, also worse than expected.

Aeropostale projected an adjusted first-quarter loss of 70 to 75 cents per share, significantly larger than the loss of 17 cents per share analysts expected.

In premarket trading, shares of Aeropostale Inc. fell $1.25 to $6.05. Shares hit a 52-week low of $6.04 last month.

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