Looks like Aéropostale is not just getting a second chance; it is also getting a vote of confidence from its new owner/landlord, Simon Property Group, which maintains the stores are more profitable than they appear.
Simon, along with Authentic Brands Group and liquidators Hilco and Gordon Brothers, managed to pull Aéropostale out of liquidation and bankruptcy with a bid and plan to shrink the 800-location chain down to just 250. But, it seems, Simon has thought better and decided that it wanted to double that up to 500.
“Right now, we’re looking at around 500 stores,” Simon Property Group CEO David Simon said. “We expect every one of those stores to be profitable.”
He added: “The fact of the matter is we found out there’s a lot more store profitability out there than we thought.”
The deal when first announced was something of a head-scratcher for Wall Street analysts since landlords generally don’t buy stakes in their tenants, especially if they are bankrupt. The most popular theory was that the rapid shutdown of so many mall brands, like PacSun and Wet Seal, of late have mall owners looking to stabilize the stores that keep their malls viewed as destinations.
But David Simon said the investment was mostly motivated by the prospect of a hefty profit, thanks to the bargain basement price paid for Aéropostale. Simon only paid $33 million for its share, and considering the real estate company’s $65 billion stock market value, it can afford to gamble a little bit on a comeback.
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