Gaining traction in teen fashion isn’t easy lately. It can be hit or miss, and some retailers, such as American Eagle (AEO), are seeing same-store sales crumble. Competitor Aeropostale (ARO) faces the same dilemma. The teen retailer operates 1,027 stores, mostly in the U.S., that sell trendy apparel that’s competitively priced. But first-quarter same store sales fell 7 percent.
Quarterly earnings per share for Aeropostale plummeted 56 percent to 20 cents. Meanwhile, revenue rose 1 percent to $469.2 million versus $463.6 a year earlier.
But Aeropostale does have some aces up its sleeve. The retailer’s value-priced goods can weather recessions better than most, analysts note. And Aeropostale is expanding into Asia. It will open 25 stores in Singapore, Malaysia, and Indonesia in the next five years. Analysts note, though, that Aeropostale lacks the brand-name clout of a store such as Gap (GPS), so global moves may fall flat.
No visible improvement ahead
So is Aeropostale a buy? For now, perhaps not. Of the 27 analysts that follow the retailer tracked by Thomson/First Call, only two have strong buys, with two buys, 19 holds, two underperforms, and two sell recommendations.
In late May, Stifel Nicolaus downgraded Aeropostale to a hold, citing fashion missteps, rising costs, and no visible company improvements on the horizon.
© 2017 Newsmax Finance. All rights reserved.