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Aeropostale to Explore Strategic Options as Losses Persist

Teen retailer Aeropostale could soon consider selling itself as sales have slumped fairly steadily and aren’t showing signs of an uptick.

The company reported fourth quarter results Thursday, with net sales falling 16.1% to $498 million and comparable sales across stores and e-commerce down 6.7%.

Losses in the period totaled $21.7 million compared to last year’s fourth quarter losses of $13.5 million. Adjusted operating losses came in at $7.6 million, a far fall from the previous year period’s $3.7 million operating profit.

“Our fourth quarter 2015 adjusted operating loss of $7.6 million was within our previously issued guidance,” Aeropostale CEO Julian R. Geiger, said. “Additionally, the initial reaction to both our Spring product and our two-chain Factory and Mall strategy is very encouraging with comparable sales turning positive since our Factory Chain launch at the end of February.”

For 2015 overall, the retailer reported sales down 18 percent to $1.5 billion with net losses of $136.9 million. Aeropostale ended the year with $65.1 million in cash and long-term debt upwards of $143 million.

In other unfavorable news, the company is in the midst of a vendor dispute with MGF Sourcing for allegedly violating a sourcing agreement.

“This violation is causing a disruption in the supply of some merchandise, which, if unresolved, could cause a liquidity constraint,” Aeropostale said in a statement. “The company is considering all options with respect to this dispute and to address the disruption in supply.”

Aeropostale’s 2016 isn’t looking too bright either. The company expects first quarter losses to fall in the $24 million to $29 million range, though it still has plans to spend $14 million remodeling stores and improving infrastructure.

Facing the music, Aeropostale said it will explore a full range of strategic and financial alternatives, including a potential sale or restructuring, and noted that no further comments would be made on the sbject until its board of directors settles on a solution.

“The business trend has improved significantly since we introduced our spring merchandise assortments and launched our factory store initiative,” Geiger said.  “Under normal conditions, we would be very optimistic about our potential for financial growth throughout the first half of 2016. Regrettably, our short-term visibility is limited by our current vendor dispute.”