It’s retailing’s latest trend — chief executives who leave and years later return to right the ship.
On Monday, Julian R. Geiger, who led Aéropostale through an enormous growth period, rejoined the teen chain as chief executive officer. The move wasn’t very surprising considering in May he rejoined the board amid ongoing troubles at the retailer.
“My decision to return to Aéropostale to be its chief executive officer is one that was easy to make,” said the 68-year-old Geiger, who succeeds Thomas P. Johnson. “The opportunity for sales and profit growth; the ability to reinforce the company’s special culture, and the chance to work closely with, and influence, the management team and the field organization combine to create a compelling and dynamic challenge.”
Geiger was not available for further comment beyond his prepared statement.
Other retailers have also hired back their former ceo’s. Myron “Mike” Ullman 3rd returned as ceo of J.C. Penney Co. Inc. in April 2013 to stop the company bleeding, succeeding Ron Johnson, who took the reins from Ullman in fall 2011. Ullman originally joined Penney’s as chairman and ceo in December 2004.
At Express, Michael Weiss was recruited out of retirement in July 2007 for his second stint as ceo. Weiss first retired from Express in July 2004 after leading the chain for two decades, and last month revealed plans to retire from Express for the second time in January, probably for good.
Bringing back the old guard underscores the lack of talent and bench-strength in the retail sector, and the difficulties many chains, particularly those that specialize in apparel, face amid the slow recovery of the economy and a midmarket consumer reticent to spend. The teen sector has been among the most troubled.
For several seasons, Aéropostale has been vying to reconnect with its teen base and has been losing money. A year ago, there was a major reengineering of the collection to more sophisticated styles and less emphasis on logos and basics. The $2.03 billion youth brand reexamined its shopper base, redirected design efforts to target 16-year-olds, reduced product cycle times and added details, fabric combinations and trendier fits to the mix, like skinny jeans with patchwork. Aéropostale also expanded footwear offerings, launched an activewear line called Live Love Dream, and has been stepping up online communications and licensing deals. The overall attempt was to maintain its teenage, casual appeal but update and regain relevancy and become more of a lifestyle brand, though the efforts have not borne enough fruit. The company has been closing some stores and cutting jobs.
Direct competitors Abercrombie & Fitch Co. and American Eagle Outfitters Inc. have also faced tough times, similarly affected by declining mall traffic and fickle teen tastes.
For the second quarter of fiscal 2014, Aéropostale’s net sales decreased 13 percent to $396.2 million, from $454 million a year ago. Comparable sales, including the e-commerce channel, decreased 13 percent compared to the corresponding period a year ago.
The company now expects its second-quarter operating loss to be in the range of $61 million to $64 million. This translates to a net loss in the range of 80 cents to 83 cents a diluted share, which includes net charges totaling about $29 million to $31 million, or 37 to 39 cents a share, of which about $5 million relates to non-operating items that were not previously reflected in the company’s original second-quarter guidance.
“Julian was the architect of the success of Aéropostale and the board felt in this moment that it needed to get some of that magic back,” said a source familiar with the reasoning behind the move. “The company has had significant challenges and management has worked very hard to remedy those.”
Nonetheless, the source said, this is a time when “you want to get your star pitcher.”
Geiger served as ceo and president of Crumbs Bake Shop Inc. from November 2011 to December 2013. The trendy bake shop closed stores and went bankrupt in July after steep losses, but the rights to the chain were picked up by an investment group including Marcus Lemonis of the CNBC reality show “The Profit” and Fischer Enterprises. The group intends to reopen stores.
Geiger had a stellar run at Aéropostale, which he headed from the time of its spin off from Federated Department Stores Inc., now Macy’s Inc., in 1998, through its initial public offering in 2002 and until his retirement in 2010. He was president and ceo of Federated Specialty Stores, which included Aéropostale, for two years beginning in 1996.
Karin Hirtler-Garvey, chairman of Aéropostale, said, “Julian’s previous service in the role of ceo combined with his passion for the Aéropostale brand make him an ideal choice to lead this organization. Julian was the leader of Aéropostale’s strategic direction during a period of significant growth, and we are confident in his enthusiasm for the business, his understanding of today’s teen retail marketplace and his intuition regarding teen fashion....During his tenure as ceo, Tom led the company’s strategy to increase its focus on fashion and better connect with today’s teen consumer.”
Johnson commented, “Having spent more than half of my retail career at Aéropostale, it has been incredibly rewarding to see the company grow from a few domestic stores to a global business. I am confident that the strength of the Aéropostale brand and the transformational initiatives we have executed over the past year, including the recent financing and comprehensive cost reduction plan, have set a strong path for Aéropostale to compete successfully in an evolving teen retail market.”
Earlier this year, the company closed on a $150 million credit facility with affiliates of private equity firm Sycamore Partners.
The senior secured credit facility, disclosed March 13, consists of a five-year $100 million term loan facility and a 10-year $50 million term loan that includes a sourcing arrangement with MGF Sourcing, also an affiliate of Sycamore. Aéropostale has committed to complete minimum purchases each year for 10 years. As the teen retailer fulfills its minimum purchases, all amortization payments of the associated term loan will be fully rebated.
In turn, Aéropostale has issued convertible preferred stock to the private equity firm, giving it the right to acquire up to 5 percent of the teen retailer’s common stock at an exercise price of $7.25. Stefan Kaluzny, managing director at Sycamore, joined the Aéropostale board.
Aéropostale will report second-quarter earnings on Thursday.
For the three months ended May 3, the company saw a wider net loss at $76.8 million, or 98 cents a diluted share, from $12.2 million, or 16 cents, a year ago. The company had a restructuring charge of $34.5 million, which widened its operating loss to $83.4 million from an operating loss a year ago of $20.7 million. Net sales fell 12.5 percent to $395.9 million from $452.3 million. Comps fell 13 percent, on top of a comps decline of 14 percent in the same year-ago quarter.
Aéropostale is a primarily mall-based and targets 14- to 17-year-olds with Aéropostale stores and 4- to 12-year-old kids through P.S. from Aéropostale stores. The company designs, sources, markets and sells all of its own merchandise. The company currently operates 848 Aéropostale stores in the U.S. and Puerto Rico; 75 Aéropostale stores in Canada, and 148 P.S. from Aéropostale stores in the U.S. and Puerto Rico.
There are also 162 Aéropostale and P.S. from Aéropostale licensed stores in the Middle East, Asia, Europe and Latin America. Since November 2012, Aéropostale has operated GoJane.com Inc., an online women’s fashion footwear and apparel retailer.
Aéropostale shares rose 2.21 percent, or 7 cents, to close at $3.24 and 5.56 percent, or 18 cents, in after-hours trading to $3.42 after the Geiger announcement was made.
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