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Simon and General Growth Confirm Aeropostale Acquisition

Zacks Equity Research

Mall landlords Simon Property Group SPG and General Growth Properties GGP together with brand development company Authentic Brands Group (ABG) announced that the acquisition of the apparel and accessories brand, Aeropostale, has been finalized. This is a landmark move in the history of the retail real estate market. It marks the takeover of a troubled retailer by its landlords, saving thousands of jobs.

The brand will be available in more than 700 retail doors globally. Specifically, over 400 stores in the U.S. and Canada, along with around 300 doors across Latin America, Europe, the Middle East and Southeast Asia will continue to offer the brand.

Moreover, there are solid scopes of growth for this brand in the long term. This is because, in addition to the expertise of the retail landlords, the brand would benefit from ABG’s proven proficiency in brand building and licensing.




Also, according to the CEO of General Growth Properties, “Aéropostale has significant brand equity and the go-forward portfolio of stores generates more than $1 billion in global retail sales, over $800 million of which is from the U.S.” This is encouraging for the retail landlords and builds up expectation for solid top-line contribution from the acquired entity.




The U.S. retail real estate market has been plagued with issues like downsizing and bankruptcies of retailers in recent years. This is because mall traffic continues to suffer amid rapid shift in customers’ shopping preferences and patterns with online purchases growing by leaps and bounds. These have made the retailers reconsider their footprint and eventually opt for store closures in recent times. (Read: Retail REITs Dip on Macy's Store Closure Announcement).

Aeropostale, too, struggled with cutthroat competition in the retail market and increasing rivalry from online channels and filed for bankruptcy in May this year. Amid this, this latest move marks a noble way for the mall landlords to retain the top-performing malls and avoid bulk store closures resulting from any liquidation move.

Currently, both Simon Property and General Growth carry a Zacks Rank #3 (Hold). A better-ranked stock in the REIT industry is InfraREIT, Inc. HIFR, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Also, investors can consider another stock – American Assets Trust, Inc. AAT – that has a Zacks Rank #2 (Buy).

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SIMON PROPERTY (SPG): Free Stock Analysis Report
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