NEW YORK (AP) -- Aeropostale needs to get more aggressive in its turnaround efforts if it wants to see meaningful change, an analyst said Thursday.
The company's stock fell more than 5 percent in premarket trading.
On Wednesday the teen retailer reported a third-quarter loss and its revenue fell as it discounted merchandise to try to draw shoppers. The chain also said its fourth-quarter loss could be bigger than analysts expect.
Like many of its teen retailing peers, Aeropostale Inc. is dealing with cautious spending among young shoppers. The company has been trying to make its merchandise more trendy and scaling back on logo merchandise. But it stepped up discounting in the third quarter in order to be in a healthier inventory position going into the fourth quarter.
Randal Konik of Jefferies said in a client note that Aeropostale could set up well as a strong recovery story if it starts to gain some traction. While the company's third quarter was weak, the analyst said its inventories are cleaner and he's happy management boosted the number of anticipated store closings over the next few years to 175 from 100.
Konik reaffirmed a "Buy" rating and $12 price target.
Stifel Nicolaus' Richard Jaffe said that Aeropostale is taking some actions to try to improve its business, including localizing products, being conservative on inventory purchases and ramping up store closings. Jaffe said these and other moves are a step in the right direction but that Aeropostale still has to find compelling merchandise to offer its customers in order to get them to buy. The analyst said that Aeropostale's fashion items have improved, but "given the company's consistently poor merchandise offerings over the past several years, we believe it will take time for Aeropostale to win back its customers, despite an improved fashion assortment."
Jaffe maintained a "Hold" rating.
Shares of Aeropostale declined 54 cents, or 5.8 percent, to $8.82 in premarket trading about 1 ½ hours before the market open.
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