Why Aeropostale Shares Dropped and Then Recovered

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.


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  • Report this Comment On January 10, 2013, at 5:57 PM, SeekingAlf wrote:

    Title should have been "ARO was down, then up. Here's a couple sentences from the transcript"

    Really excited to read an analysis of why the stock moved, but this article says almost nothing about the why. It speculates that the sales were already priced in, which is a totally generic analysis of anything for a stock.

    You should look into the short sale restrictions that were triggered and in place through Friday's trading. Any color into who is buying would be useful (though I know is difficult to come by...unverified speculation I have heard is insiders).

    When you put "why" in this title it implies that you provide or speculate on why with analysis. This article isn't even an inch deep.

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