Four Pretty Little Liars may just change the sad story of Aeropostale (AROPQ) the specialty mall-based teen retailer whose stock price has been halved since last summer. The company announced that it will collaborate with ABC Family TV show Pretty Little Liars' costume designer Mandi Line for a character-driven clothing collection.

source: Aeropostale

The Pretty Little Liars collaboration may also make the company more attractive to possible acquirers. Aeropostale has been under pressure from activist shareholder Crescendo Partners to sell itself. On January 14, Bloomberg News, quoting unnamed sources, reported the company has reached out to two private-equity firms to explore a possible sale. Note: the company is not currently negotiating a sale.

Drama queens
The show has been a teen sensation and its season finale propelled it to become the most-tweeted show in TV history with almost 2 million tweets. You're probably unfamiliar with the ongoing teen traumas of Aria, Spencer, Hanna, and Emily.  Over 4 million viewers, mainly female viewers between the ages of 12-34, watched the show's Halloween special and over 2 million watch weekly episodes.

This is exactly the demographic that Aeropostale needs. Designer Mandi Line told Fashionista.com she was inundated with requests for a retail outlet to stock the show's designs. Originally hoping for a larger retailer, Line is satisfied with Aeropostale and she expects to work up four collections. She added, "I'm going to bring you a customer you've never had — a Pretty Little Liars customer who's like, 'Wow, Aero? Really?'"

Aeropostale strategically scheduled the collection launch for the same day as the season premiere, January 7, at its 976 stores and online in the US, Puerto Rico, and Canada.

Teen Trauma
Like beleaguered teen-retail rival Abercrombie & Fitch (ANF 0.95%), Aeropostale received a downgrade from Jefferies analyst Randal Konik on January 2 from Buy to Hold. He gave a $7 price target for Aeropostale (which closed at $8.63 on January 8). The median target is $10 out of 23 analysts. The stock also has a huge short interest at 38.6%. This isn't surprising given its fundamentals: profit margin of -3.25%, quarterly revenue growth of -15.10%, and a price of twice its book value of $4.42.

On the third quarter earnings call, which included Black Friday results, CEO Thomas Johnson gave a downbeat recap using the dreaded phrase, "clearly disappointing," noting a turnaround has taken, "longer than expected." Unlike many retailers, even Aeropostale's e-commerce sales were down, for a total comp sales decline of 15%.

The litany of bad news continued for Aeropostale with cash and cash equivalents declining to $68 million from $184 million. Store closings will triple to 46 from its 2013 expectations of only 15. Finally, Aeropostale guided for a loss of $0.24-$0.32 per share for the fourth quarter, making this the fourth quarter in a row with disappointing results.

Johnson partially blamed a challenging and promotional environment in retail. Other teen retailers like American Eagle Outfitters (AEO 0.18%) and Urban Outfitters (URBN -0.11%) have also underperformed. However, Jefferies' Konik thinks these latter two are top 2014 picks if a promotional ceasefire takes hold and their strong managements prevail.

Aeropostale's management said it was cutting expenditures but how to bring in sales? The company highlighted another promising brand launch. Teen YouTube sensation Bethany Mota with over 4 million subscribers, debuted a much-anticipated Aeropostale collection in December. EVP Emilia Fabricant said "The collection truly underscores how we are evolving our business in terms of relevancy and speed to market as the line progressed from concept to launch in just 3 months."

source:aeropostale.com/bethany

Better late than never
On the eroding relevance of the Aero logo brand, CEO Johnson admitted," Teen preference has changed so significantly it has been a seismic shift over the past 5 years...We know these truths because of the declining business over a multi-year scenario." He also said the change from almost 100% logo merchandise to a more fashion-oriented inventory has been a pleasant surprise for teens questioned in exit interviews.

In Aeropostale's defense the speed of the Mota and Liars launches has shown improving responsiveness, a must-have trait for teen retailers. Rival Abercrombie & Fitch has been working to overcome last year's  public relations snafus and teens' perception that its pricey, preppy cool is wearing thin.

Urban is generally lumped in with teen retailers but it better represents an 18-34 Millennial demographic. At a 20 trailing earnings multiple and a $54 price target it offers significant upside if Jefferies is right. Its Free People division is outperforming and the company is expanding in Europe and Japan.

American Eagle at a 17.72 trailing multiple and a 3.30% yield looks interesting. More so after the Konik upgrade as he argued, " We believe the company can drive a significant margin and earnings rebound against easy compares, and restore brand momentum through more focused merchandising, faster speed to market, and strict inventory and expense control."

The Foolish takeaway
To be fair, Aeropostale is definitely improving speed to market, and expense and inventory control was the main thrust of the Aeropostale earnings call. The something drastic the company needed are these two launches; bold moves that may just change the Aeropostale story into one with a happy ending even if it doesn't sell itself.