Aeropostale Inc. (ARO)
Company BusinessAeropostale is a retail mall based casual clothing store which targets teenagers (14 - 17 years old)through its Aeropostale stores and targets 7 to 12 year olds through its P.S. from Aeropostale stores.Clothes can be purchased from inside the respective stores or online through their website. Theycurrently have 918 Aeropostale stores in 50 states and Puerto Rico, 68 Aeropostale stores in Canada,and 72 P.S. from Aeropostale stores in 21 states. Also, after they signed their first Licensing Agreement,one of its international licensees operated 11 Aeropostale stores in the United Arab Emirates as of October 29,2011. They have announced that they have signed a second licensing agreement in March2011 and is expected to open approximately 25 stores in Singapore, Malaysia, and Indonesia over thenext 5 years. The third license agreement was signed on November 15, 2011, which is expected to openapproximately 30 stores in Turkey over the next 5 years. Aeropostale does not assumes inventory riskon the merchandise sold in their licensee's stores and do not own/lease the real estate where the storesoperate.
Their competitive advantage comes from having lower prices and offering longer promotionsthan their competitors.
Aeropostale P.S. was launched in June 2009 and may provide future growth.
Their 2012 Strategic Initiatives include investing in future growth with e-commerce,international, and P.S. from Aeropostale
Middle East - 3 new stores in 2011 / total of 12 stores including P.S.
Singapore - 2 new stores in 2011
Total International - 14 stores in 2011
Next Countries - Turkey in Summer 2012
P.S. partnered with Marvel in Q3 and showed strong holiday results
Did not repurchase shares of their common stock during Q3, 2011 but have been repurchasingshares over the years
Highly seasonal business with high demand in back to school and Christmas shopping (secondpart of the year)
Has not paid a dividend for the last 3 fiscal years and does not plan on paying a dividend
Strategies in place to mitigate the rising cost of raw materialsPotential Risks
Aeropostale has been experiencing declining demand for its women's fashion design
The company has been having an increasing inventory amount (may be due to an increase in theamount of stores they are creating) and higher clothing discounts that is putting pressure on itsprofit margins
Massive amount of operating leases are expected from 2012 to 2016 (off-balance sheetfinancing)