Is Mall-Based Retail Dead?

So far this earnings season, retailers' quarterly results have been far less than inspiring, as consumers remain deeply uninterested in opening their wallets. But amid the carnage, one retailer stands head and shoulders above the competition.

Which of these is not like the others?
After the most recent quarter's dismal results, investors clearly hope that shoppers perk up for the back-to-school season:

Company	CAPS rating (Out of 5)	Quarterly Earnings/Loss Per Share	Quarterly Sales Increase/Decrease	Same-Store Sales
Aeropostale (NYSE: ARO  )	**	$0.57	20%	12%
Hot Topic (Nasdaq: HOTT  )	*	($0.07)	(5.4%)	(7.7%)
Citi Trends (Nasdaq: CTRN  )	*	($0.00)	(3.5%)	(12.4%)
Gap (NYSE: GPS  )	*	$0.33	(7.1%)	(8%)

*All data from CAPS and Yahoo! Finance as of Aug. 24.

Gap managed to beat analysts' expectations by a penny, and its improved margins may have jazzed some investors. But come on -- Gap's one of retail's worst offenders, spending years on a supposed turnaround that just won't turn around. Same goes for long-suffering Talbots (NYSE: TLB  ) .

Judging by the one-star ratings that our CAPS community affixes to Gap, Hot Topic, and Citi Trends, mall-based retailers aren't exactly popular among investors. However, the oddly pessimistic two-star rating on Aeropostale might reveal an opportunity for savvy investors.

A solid stock idea
Aeropostale has been on my personal radar for a long time, thoroughly outshining rivals such as Abercrombie & Fitch (NYSE: ANF  ) and American Eagle Outfitters (NYSE: AEO  ) in operational success.

In its most recent quarter, Aeropostale increases earnings by 83%, boost sales 20%, and expand comps by 12%. It's trading at 15 times trailing earnings, which isn't too bad, considering that many worse-performing retailers are being exchanged at heftier multiples. Gap's also trading at a price-to-earnings ratio of 15, which seems high, given its business weakness and the related uncertainties; Hot Topic's at nearly 17; and Citi Trends trades at 19 times.

As I said in the Fool's recent sector roundtable, investors certainly can find opportunity in the retail sector, but they must do so carefully. Look for retail leaders with real business strength, a competitive edge, and strong balance sheets.

In those respects, Aeropostale seems like the one stock in retail that actually looks hopeful.

 Read up on some related Foolishness on retail:

• Sometimes discounts aren't enough, especially in the latest quarter.
• When will consumer spending really recover?
• When will retail finally turn?