Aeropostale Gains Big As Women’s Apparel Spending Climbs

Teen apparel retailer Aeropostale (NYSE:ARO) might be in for a solid back-to-school season, riding on the expected rise in women’s apparel spending. According to a recent report by IBM (NYSE:IBM), in-store sales of women’s clothing is expected to climb 9.2 percent over the next three months. A slowdown in women’s apparel segment, which contributes roughly 70% of Aeropostale’s total sales, was the major dampening factor for the company last year. Aeropostale competes with the likes of Abercrombie & Fitch (NYSE:ANF), Gap Inc.(NYSE:GPS), Urban Outfitters (NASDAQ:URBN) and American Eagle Outfitters (NYSE:AEO) in the teen apparel space.

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Women’s apparel spending on the rise, Aeropostale set to gain

A weak women’s apparel business was the major contributor behind the decline of Aeropostale in 2011, as the company lost nearly 40% of its stock value during the year. While a lack of balance in its product mix for women’s apparel segment remained the primary factor behind this decline, a simultaneous decline in consumer spending due to weak macro-economic conditions also contributed heavily to Aeropostale’s woes.

Even though Aeropostale has worked hard in balancing its product mix in 2012, the company hasn’t been able to fully realize its gains so far due to the prevailing weak consumer sentiment in the U.S. If, as the latest report by IBM suggests, there is an improvement in women’s apparel spending, Aeropostale can expect to see not just better comparable sales but also better margins on higher sales of its full-priced merchandise.

Additionally, we believe that this improvement in women’s apparel spending couldn’t have come at a better time for the company, as back-to-school season holds immense importance for teen retailers such as Aeropostale and is often regarded as a benchmark before the all important holiday season.

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