Shares of the teen retailer were surging on Tuesday by 21% to $3.91 following its decision to bring back Geiger to replace Thomas Johnson as CEO as well as its disclosure that second-quarter losses would be narrower than expected. But the retail industry overall has rapidly changed in the past few years, particularly so for the mall-based teen sector, leaving a tall order for Geiger to get the company up to speed.
"While Geiger's knowledge of Aero is unmatched, we expected a CEO replacement to provide a fresh look at the business given the changing teen landscape," Bank of America Merrill Lynch analyst Lorraine Hutchinson wrote in a research note. Hutchinson maintained her "underperform" rating for the stock.
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Geiger was CEO of Aeropostale from 1996-2010 and chairman from 1998-2012, where he led the company through a successful run as teens flocked to malls in search of logo-specific and homogenous clothing. Geiger left Aeropostale to run Crumbs Bake Shop from late 2011 to December 2013. But last month Crumbs closed all of its stores and is in the process of Chapter 11 bankruptcy.
Despite Aeropostale's effort to reinvent itself by offering a wider assortment of fashion brands and new categories like footwear, a rebranding effort under the Aero Now campaign, and the consideration of closing up to 16% of its store base, reinstating a CEO that just came off of a failed business seems questionable.