Aeropostale (NYSE: ARO) has proven itself to be a retail anomaly lately, since it has not only survived but actually thrived in this perilous time. However, now it’s doing something even more impressive (not to mention gutsy): It’s opening up a new concept.
The new concept will be called P.S. from Aeropostale, and will target 7- to 12-year-olds -- the kids its teen-oriented core concept doesn’t reach.
It’s a bit of a gamble, of course, when so many retailers are actually closing nascent concepts, not opening them. Abercrombie & Fitch (NYSE: ANF) is ditching its struggling Ruehl concept. And of course, Aeropostale is no stranger to concept failure; it recently closed a test concept called Jimmy’Z. (Interestingly, Aeropostale says P.S. is not a test concept, it’s the real deal.)
Meanwhile, I admit, I called Gap (NYSE: GPS) foolhardy for testing out a new concept in the current economic climate. Of course, with Gap, part of my argument was that it’s struggling with its existing concepts, so why add one more distraction that may not even work out? Aeropostale, on the other hand, has been doing exceedingly well with its business for quite some time.
Aeropostale's outperformance may very well mean this is a great time to launch its competitive strike. Its P.S. concept could grab market share from Abercrombie & Fitch’s abercrombie chain for kids, or from J. Crew’s (NYSE: JCG) juvenile version, Crewcuts. Both of those chains offer higher-priced merchandise, and Aeropostale’s lower-priced apparel has obviously been drawing some crowds lately. Witness its 19% same-store sales growth in May. Given its string of success in this climate, I’d surmise that Aeropostale's move bodes ill for both competitors, particularly for the struggling Abercrombie & Fitch.
And of course, such a concept will also compete with the likes of Wal-Mart Stores (NYSE: WMT) and Target (NYSE: TGT), too.
We’ll see if Aeropostale can turn P.S. into a pint-sized powerhouse of sales. However, it seems to me that shareholders can feel pretty good about Aeropostale’s competitive position at the moment (not to mention the fact that it’s a debt-free retailer, which gives it a lot of freedom). It’s strong enough to make an aggressive competitive strike against rivals, and that’s an enviable position to be in these days in the retail landscape.
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