One of the hottest teen brands of all time is getting closer to extinction
But it has lost popularity with teenagers - look no further than its dismal results for the fourth quarter of fiscal-year 2015, and the entirety of the year.
Comparable sales, including e-commerce, were down 6.7% compared to this time last year. Net sales were down 16.1%.
This comes on the heels of a rough year. Comparable sales for all of fiscal 2015 were down 8.6%, and net sales for all of fiscal 2015 were down 18%.
Shares were down 46% after earnings.
But terrible sales do not happen out of nowhere - a company has to make missteps.
Aeropostale is guilty of one major mistake: It is not keeping up with its target customers. In fact, it seems stuck in a time capsule.
"The central problem for Aero remains that it is firmly out of favor with the fickle younger consumer. Indeed, it has now become a brand that gets overlooked on many shopping trips simply because its range does not resonate and has little relevance. While consumer tastes have shifted, Aero has steadfastly clung to a range that looks more at home in the mid 2000s than 2016, and a store environment that all too often resembles a yard sale," Conlumino analyst Håkon Helgesen wrote in a note to clients.
"This misalignment, combined with the boredom that arises from a lack of change, has resulted in many shoppers defecting from the brand and switching to fast-fashion rivals like H&M and Zara. In response, Aero has attempted to stimulate demand with heavy discounts and promotions. However, as the problem lies with product design and assortment, rather than with pricing, the impact on sales has been negligible while the effect on margins has been horrific," Helgesen wrote.
Since clothes aren't selling, Aeropostale has to resort to constant discounts to try to clear its inventory.
Conlumino analyst Carter Harrison wrote last quarter:
This loss of customers has weakened turnover of inventory which has left stores crowded with merchandise - something which further detracts from the shopping experience and has seen many shoppers defect to fast fashion rivals. In response, Aero has attempted to stimulate demand and clear stock with heavy discounts and promotions. However, as the problem lies with product design and mix, rather than with pricing, the impact on sales has been negligible.
Yet interestingly enough, Aeropostale has been desperately trying to appeal to young people - the retailer secured popular YouTube personality Bethany Mota for her own collections last year and has curated a blog with a Pinterest-friendly aesthetic. These efforts are just failing to resonate with the brand's target customers.
Harrison wrote last quarter:
To be fair to Aero, the misalignment of the range is not from a lack of trying. Over the past couple of years the company has brought in a whole raft of brands, including Tokyo Darling and Bethany Mota, but has seemingly done so without much consideration of the holistic proposition. The result is that Aero now has a very jumbled and confusing assortment and no real distinct point of view and has lost customers as a result.
A recent survey proved that teens are fleeing the brand in droves.
Piper Jaffray surveyed teens to find out where they are - and aren't - shopping in its semiannual Taking Stock with Teens survey.
The brand ranked at the top for brands that upper-income females no longer wear. Between 22% and 32% of teens surveyed over the past two years say they no longer shop there.
And it didn't rank too favorably for upper-income males, either - although the brand is in not as dire straits with men as it is with women.
But CEO Julian Geiger seems optimistic about what's coming up for Aeropostale, despite some current setbacks. He said in a press release:
The business trend has improved significantly since we introduced our spring merchandise assortments and launched our factory store initiative. 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.