January 10, 2013
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of teen clothing retailer Aeropostale (NYSE: ARO ) fell as much as 11% on poor holiday sales today, before recovering most of those losses by the end of the session.
So what: Sales for the nine-week period ending December 29, 2012 fell 6%, compared with a year ago, to $645 million, and comps fell 9% during that time. CEO Thomas Johnson said "traffic trends deteriorated significantly in December" after a strong Black Friday weekend, and the company scaled back EPS sharply to $0.20 to $0.24 from $0.36 to $0.41.
Now what: While this was clearly a bad report, the stock's recovery indicates that a slowdown in sales was probably already priced in. Still, the holiday season is crucial for retailers, and Aeropostale seems to be losing ground to rivals like Abercombie & Fitch and American Eagle. This was the second year in a row that comparable sales fell sharply, which bodes poorly for the rest of the year. I'd stay away until that trend reverses.
Don't miss the next update on Aeropostale.