(Adds details on liquidity position, analyst comment, updates
May 23 Aeropostale Inc could raise going
concern doubts as soon as next year, as the struggling teen
apparel retailer burns up cash amid mounting losses, Morgan
Stanley analysts warned.
The company lost more than a fifth of its market value on
Friday, a day after it reported its sixth straight quarterly
loss and forecast a bigger-than-expected loss for the current
"We think (Aeropostale) is a structurally challenged
business in decline," Morgan Stanley analyst Kimberly
Greenberger said in a note.
Greenberger said she expects "going concern issues in
2015/2016" unless the company stabilizes its business.
Greenberger is a top-rated analyst for the company, according to
Thomson Reuters StarMine.
"Aeropostale occupies the weakest competitive position in
teen retail, and continues to cede market share to cheap fashion
retailers and other teen retailers," the analyst said.
Aeropostale's shares touched a low of $3.38 in midday
trading -- their lowest in more than 11 years, making the stock
the top percentage loser on the New York Stock Exchange.
The company said on Friday its first priority continues to
be maintaining appropriate levels of liquidity.
"We have sufficient liquidity to work through our working
capital needs with our $230-million revolver ...," the company
said in an email.
Aeropostale reported on Thursday a 13 percent drop in
same-store sales for the first quarter.
The sharp drop in same-store sales and the mounting losses
have raised liquidity concerns.
Aeropostale has a rating of 26 out of 100, according to
research firm Rapid Ratings, which gauges the financial health
of companies. The rating of 26 puts Aeropostale in the high-risk
The company ended the first quarter with cash and cash
equivalents of just $24.5 million, its lowest since 2000,
according to Cowen & Co analyst John Kernan.
Cowen & Co said in a note that the company burned $123
million in cash in the first quarter and was forced to tap into
its credit facility as it continued to discount to attract
Aeropostale struck a $150 million funding deal with Sycamore
Partners in March, but Kernan said that even with that lifeline
"a turnaround is hard to conceptualize".
"With a core business too far off the mark, and threatening
to tarnish the brand, we don't see things turning for Aero with
the environment as challenging as it is currently," BMO Capital
Markets analyst John Morris said in a client note.
Morgan Stanley, BMO, Cowen & Co, Janney Capital Markets,
Jefferies & Co and Topeka Capital Markets cut their price
targets on the stock.
According to Thomson Reuters data, at least four analysts
have a "sell" rating on Aeropostale, while 21 recommend "hold".
(Reporting by Siddharth Cavale and Shailaja Sharma in
Bangalore; Editing by Don Sebastian and Maju Samuel)