Measuring the effectiveness of Aéropostale’s strategy to regain revenue

My uncle of Mexican descent was a tailor who once had two factories at LA’s Fashion District. A stickler for quality fashion wear, he loves to visit Aéropostale shops for inspiration and introduces me to its line of scents for men which I absolutely love.

Despite its reputation for quality, the brand sweltered as it struggled with its financial performance. In 2014, they got back its former CEO, Julian Geiger, who observed “a very different environment” than when he first led the company that ended in 2010. He observes that the fashion cycle had been more aggressive because of two factors:

(1) social media has become a critical strategic tool

(2) customer engagement is more important than ever

An alchemy of solutions had been put in place to be play offensively and not defensive, including:

(a) creating a limited number of proprietary sub brands to complement Aéropostale assortments in stores; 

(b) endorsing and increasing focus on the use of social media influencers in order to be more relevant to today’s teenagers; 

(c) focusing on additional and improved customer engagement within its stores; 

(d) accelerating the growth of its international store licensing business; 

(e) restructuring its P.S. from Aéropostale business to focus on faster growing sales channels; 

(f) strategically and surgically reducing store base through store closings for both the Aéropostale and P.S. from Aéropostale brands.

It did make sense to bring Aéropostale to (1) countries that have very young, modern demographics, like the Philippines and Mexico (2) countries who have a strong social media influencing community, such as Malaysia and Chile. They have recently gotten YouTube Influencer, Bethany Mota, to carry its brands on Poshmark. https://poshmark.com/browse/Bethany-mota-Boots

A few insights are worth noting in Geiger’s strategies:

(i) the merchants will have the responsibility for all channels of distribution

(ii) it will be targeting ‘real teens’ instead of ‘fast fashion’ teens through an enhanced market testing process 

(iii) it will replace universal allocation with more targeted allocation to meet disparate patterns in its stores

(iv) it will aggressively grow its international licensing business

So did the strategy work? Here are the numbers:

Net sales decreased by $331.8 million, or by 18% in fiscal 2015, as compared to fiscal 2014. The decrease in net sales was driven by:

(1) a decrease of $133.8 million, or 9%, in comparable sales, including e-commerce revenue;

(2) a decrease in average square footage of 19%, resulting from the closing of 50 stores during fiscal 2015; and

(3) a decrease of $196.2 million in non-comparable sales.

(4) a decrease of $1.8 million in international licensing revenue

Consolidated comparable sales, including the e-commerce channel, decreased by 11% in its young men's and by 7% in its young women's category in fiscal 2015. The overall comparable sales, including the e-commerce channel, reflected decreases of 4% in the number of sales transactions, 4% in average unit retail and 1% in units per sales transaction.

Additionally, revenue from its international licensing segment increased to $34.7 million during fiscal 2014 from $21.5 million in fiscal 2013. The increase was primarily due to the increase in licensee operated locations to 239 as of January 31, 2015 from 96 as of February 1, 2014.

My take on this:

(i) it is too early to see growth from a heavy transitional strategy, but lessening physical store square footage seems to be the right strategy: loss of income in 2016 did decrease from 2015, which bode well, but this also means increasing commensurately "online square footage"
(ii) perhaps increasing prudence in choosing the right social media influencers would help increase awareness of the brand

(iii) has a test on price points and on whether there’s a purchase blockage caused by price points been conducted
(iv) what has been done on the rewards front and testing older targets with more disposable income, but want to look seventeen?

What do you think?