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Sycamore Partners: Saving Retailers One Chain at a Time

Paul Ausick

Private equity firm Sycamore Partners and its affiliates appear to be on a mission to snatch poorly performing retailers from the jaws of oblivion. The firm said Tuesday morning that it had acquired a nearly 8% stake in struggling teen retailer Aeropostale Inc. (ARO) for about $54 million. Sycamore acquired Talbot’s Inc. last year and paid $600 million for Hot Topic this past June.

There are plenty of candidates for Sycamore to choose from because the teen apparel sector has been a big disappointment in the first nine months of 2013. Aeropostale’s shares were down nearly 34% at Tuesday’s close. Abercrombie & Fitch Inc. (ANF) is down 22% for the year and American Eagle Outfitters Inc. (AEO) is down nearly 28%. Even a stock showing a nice year-to-date gain like The Wet Seal Inc. (WTSL), up about 38% for the year, is down more than 20% since early June.

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Store traffic has been slow and promotional prices have been the rule, not the exception. Back-to-school sales were anemic. Abercrombie’s same-store sales in August were down 11.5% year-over-year. American Eagle saw same-store sales fall 6.8% and Aeropostale’s sales were off 14.7%. Wet Seal managed to post a gain of 3.9%, but that wasn’t too hard considering same-store sales in August 2012 fell 13.5%.

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Another apparel retailer that appears to be doing better is The Gap Inc. (GPS). The share price is up more than 33% year-to-date and same-store sales rose 1.9% in August on top of a big 9% gain in sales in August of last year. Gap’s appeal adults insulates it somewhat from the fickle and fashion-conscious whirl of the teen clothing stores.

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Shares of Aeropostale are up about 20% Tuesday afternoon at $10.34 in a 52-week range of $7.78 to $17.10.

Among the other stores, Wet Seal is up the most -- 3.5% -- at $3.81 in a 52-week range of $2.65 to $5.20. Gap is up the least, 0.7% at $42.13, in a 52-week range of $29.84 to $46.56.

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