Topic: Growth Stocks

AEROPOSTALE INC. $13.20 – New York symbol ARO

AEROPOSTALE INC. $13.20 (New York symbol ARO; TSINetwork Rating: Extra Risk) (646-485-5410; www.aeropostale.com; Shares outstanding: 81.3 million; Market cap: $1.1 billion; No dividends paid) is a mall-based retailer of casual clothing and accessories. It now has 994 stores in the U.S., Canada and Puerto Rico, and mainly targets 14- to 17-year-old women and men. Aeropostale’s 99 P.S. from Aeropostale stores in the U.S. are aimed at seven- to 12-year-old elementary-school children.

In the three months ended October 27, 2012, Aeropostale’s sales rose 1.6%, to $605.9 million from $596.5 million a year earlier. Same-store sales fell 2%, compared with a 9% decline a year ago. Sales from the company’s e-commerce business increased 12%, to $51.1 million from $45.7 million.

Aeropostale’s earnings rose 3.5%, to $24.9 million from $24.1 million a year earlier. Earnings per share rose 3.3%, to $0.31 from $0.30, on fewer shares outstanding. The latest earnings also beat the consensus estimate of $0.29 a share.

Teenage customers, especially those affected by the slow U.S. economy, are increasingly demanding not only fashion, but fashion at low prices. That’s Aeropostale’s traditional market, but it’s facing added competition as other teen-clothing retailers offer more lower-priced merchandise.

The company now appears to be successfully refreshing its clothing lines with popular new colours and styles, and price competition should subside as the economy improves. Aeropostale should be able to repeat its past success at attracting customers, but its sales may remain weak in the near term.

Aeropostale is still a hold.

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