July 16, 2010
Aeropostale (ARO)
Written By Gregory Spear
If you walk around any large mall in the U.S. you will see a number of teen fashion outlets including Abercrombie & Fitch, American Eagle, Anthropologie and Aeropostale. With 14% market share, American Eagle is arguably the leader, but that may be changing. In the first fiscal quarter ending May 1, same-store sales at Aeropostale, Inc. (ARO, NYSE) grew 8% year over year, and Aeropostale has been beating its peers in same-store sales growth for two and a half years running. According to JPMorgan, Aeropostale’s market share more than doubled from 2005 to 2009 and now stands at 11%. Credit goes to the new co-CEO from Victoria’s Secret who has been the merchandising manager over much of that period. Total sales for Q1 rose 14% to $463 million. In the midst of the retail recession, ARO opened 40 stores in 2009 and has about 900 total. What do they sell? T-shirts and shorts and whatever is the new hot item your kids can’t live without. … The price is right, too, if you have $10 you might be able to get two. EPS for the first quarter of fiscal 2010 increased 55% to a record $0.48 per share. Net income increased 43% to $45 million on a 14% sales pop. These comparables were easy, however. So, is this as good as it gets for ARO? We think there is a good chance ARO will continue to take market share and continue to reinvent itself. If you want to buy shares in a retailer for your kids retirement account, this is the one.
Gregory Spear
The Spear Report