Aeropostale (NYSE:ARO)

CAPS Rating: 2 out of 5

The Company is a mall-based specialty retailer of casual apparel and accessories. The Company designs, markets and sells its own brand of merchandise principally targeting 11 to 18 year-old young women and young men.

Recs

6
Player Avatar Momentum21 (94.14) Submitted: 5/19/2011 7:06:55 PM : Outperform Start Price: $18.18 ARO Score: +6.36

I bought in Real Life before earnings. Looks like it was better to wait.

I will probably add to my position upon the opening bell since it might open under 19. Bought @ 21.17 today.

Commodity costs are an issue and it also looked like they bungled some of the women's fashions. Over time I still like the story on paper.

Report this Post 17 Replies
Member Avatar Momentum21 (94.14) Submitted: 5/20/2011 1:00:10 PM
Recs: 2

doubled up my initial position @ 17.92

Member Avatar gopyerk (90.27) Submitted: 5/25/2011 6:33:16 PM
Recs: 0

It appears they have no real plan as a discount retailer to combat chains that are traditionally high priced encroaching into the discount areas. Abercrombie, Hollister, American Eagle and The Buckle are all in competition for Aero's core customer and Aero has not shown a plan to investors that makes sense in a competitive headwind. A discount retailer that can't turn profits at expected rates or above in an economy ripe for discount consumers makes me very nervous. What will they do as recovery continues and discount shoppers dwindle?

Member Avatar Momentum21 (94.14) Submitted: 5/26/2011 1:20:44 PM
Recs: 2

"What will they do as recovery continues and discount shoppers dwindle?"

With respect to discount shoppers I am not sure I get you dude...they target a young demo and yes, the market is (and always has been competitive). They have a history of providing a pretty solid return on investment and rev growth and my bet is that the fact that they are trading at a significant discount to those mentioned above.

I am not a fan of buying retailers but this case intrigued me because of the value story on paper. My thesis is that the worst case scenario is "dead money" and if they prove that they can put aside the past 2 quarters (where Cotton was through the roof) we can see a return to the high 20's within 12 months.

Member Avatar gopyerk (90.27) Submitted: 5/27/2011 11:07:25 AM
Recs: 0

As other top flight retailers continue to take aim at the discount shopper Aero will continue to struggle. Aero has had success in the area of appealing to the discount shopper, my point was that at other companies (brands that have the cool cache amongst juniors, young adults and adolescents) the idea has been to make that dollar stretch a bit further so these consumers can afford their goods. Aero's days of dominating that teen dollar because they were the only affordable option are in the rearview mirror for now. I will stay short on this one for the time being...

Member Avatar BuffettJunior1 (97.53) Submitted: 6/2/2011 10:37:14 PM
Recs: 1

This stock is dirt cheap! I will buy within the next week.

Great fundamentals, great brand! This is a truly rare opportunity.

Patience will pay off big with this stock.

Member Avatar Momentum21 (94.14) Submitted: 6/5/2011 2:24:52 PM
Recs: 0

I will be adding additional shares this week and begin a more aggressive accumulation phase. There is no reason to be dabbling in some of the junk I own when there is return to be had here.

Three companies that make me say WTF lately: ARO, DLB and MSFT

CSCO as well but I am not going to argue for them even though they are my largest holding. I totally get the lack of love. : )

Member Avatar BuffettJunior1 (97.53) Submitted: 6/5/2011 11:34:24 PM
Recs: 0

I will buy a large amount of shares at the opening bell Monday. This is a long-term value/growth play for me. The company is expanding overseas which will help it in the long run. The financials are outstanding, especially the ROIC.

According to my DCF analysis, if the company can grow at the rate of inflation (3% per year), its intrinsic value will be more than twice what its trading for currently. However, I believe the company can grow faster than the rate of inflation in the long term.

Some analysts are saying that once the economy improves people will switch to the more expensive brands like Abercrombie and Fitch. I don't think that will be the case. This brand is targeted towards young adults. Young adults that have to pay school loans, car insurance, etc... In other words, the company's target customers will always look for products that provide more value and are still fashionable

Another thing I like is the company's share-repurchase program. Management has said that it will repurchase 200 million worth of shares this year. That alone will help the stock price appreciate in the short term.

Here is a link to an interesting article on this company.

http://www.gurufocus.com/news/134630/magic-formula-stock-aeropostale

If you're like me and like to invest in out of favor stocks, check out LLY.

Member Avatar Tactical01 (22.76) Submitted: 7/20/2011 12:25:21 AM
Recs: 0

This stock has good track record of rising revenue and earnings. It has its bad times now, it will go through it and rise up better.
According to my calculation, this stock is worth double the current price.

Member Avatar Momentum21 (94.14) Submitted: 7/29/2011 3:54:21 PM
Recs: 1

doubled position today @ 16.84 ...now a top 5 holding...

Member Avatar lionel319 (91.53) Submitted: 8/4/2011 10:10:20 PM
Recs: 0

gonna average down and double my position tonight at $13.00.

Member Avatar Momentum21 (94.14) Submitted: 8/4/2011 10:33:08 PM
Recs: 0

Not really what I had envisioned as a worst case scenario but what can you do...? : ) The theory is going to take a bit longer to play out here...

ARO closes down 24%...S&P down almost 5% to close at 1200. Buckle up!

Member Avatar latinoeconomist (27.63) Submitted: 8/11/2011 10:36:28 AM
Recs: 0

Buckle up, indeed. I believe NOW it is undervalued.

Member Avatar gopyerk (90.27) Submitted: 8/26/2011 3:02:57 PM
Recs: 0

This is not the bottom, their same store comps are down for the first time in the company history. CEO Tom Johnson has no idea what to do or what he is talking about when I listen to and read what he has to say.

They are getting outshined by other retailers and getting beat with plays from their own playbook. Instead of becoming what they should be; the leading teen discount retailer, they have become an also ran in a market full of lackluster performers. Abercrombie, Pac Sun, GAP etc... have all slid down the same slope.

Until Aero returns to their core market by offering solid discounts and strong in store promotionals they will continue the downturn. I am still shorting the snot out of this and will continue to do so...I will be a buyer when they return to fundamental plays that got them where they were.

Member Avatar EnigmaDude (93.78) Submitted: 11/4/2011 1:27:02 PM
Recs: 0

Hang in there, Momentum21! The CEO does know what he is doing:

Based on better than expected gross margins for the quarter, the Company now expects third quarter earnings in the range of $0.27 - $0.28 per diluted share, versus its previously issued guidance in the range of $0.09 - $0.15 per share.

Thomas P. Johnson, Chief Executive Officer, commented, "During the quarter we continued to make progress with our strategic initiatives, and managed our inventories carefully. While we delivered third quarter earnings that exceeded our previously issued guidance we remain cautious given industry-wide costing pressures and the current retail environment. Our entire organization is focused on carrying out our key initiatives for the remainder of the year and into next year. We continue to remain very confident in our business model and the strength and positioning of the Aeropostale brand."

Member Avatar Momentum21 (94.14) Submitted: 11/5/2011 7:36:45 PM
Recs: 0

I am back to break-even here but didn't buy as aggressively as I had planned. Amazing run lately...and my original premise is still in tact, it is still cheap when you compare them across the sector. High 20's is the target...much more volatility than I expected with this stock though...

You own some enigma dude? Thanks man...

Member Avatar Momentum21 (94.14) Submitted: 3/15/2012 3:19:22 PM
Recs: 0

Now my third largest holding and just about back to where I started buying it...and still cheap! : )

Member Avatar Momentum21 (94.14) Submitted: 3/15/2012 3:22:30 PM
Recs: 0

My cost is 18.01...@21.24 right now...wild year for these guys...traded down to 9!

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