10-year

10-Year Anniversary Promotion (20% off)

Join GuruFocus Premium Membership Now for Only $279/Year

Once a decade discount

Save up to $500 on Global Membership.

Don't Miss It !

Free 7-day Trial
All Articles and Columns »

This Apparel Retailer Can Improve, but Investors Should Remain Cautious

August 25, 2014 | About:
jaggom

jaggom

0 followers

The new fiscal year hasn't started on a cheerful note for Aeropostale (ARO). The attire retailer crashed 25% in a single day in the wake of posting a more-extensive-than-anticipated loss, and a repulsive viewpoint for the progressing quarter indicates that Aeropostale is a stock to stay far away from. Aeropostale has been weak in 2014 when contrasted with American Eagle (AEO) and Abercrombie & Fitch (ANF). It would appear that the pattern is set to continue until and unless its turnaround strategies start working.

What gives?

The youngster attire space has seen a shift in purchasing inclination, with new brands such as H&M and Forever 21 picking up unmistakable quality over the established retailers. Aeropostale has been a casualty of this change. In spite of the fact that administration has expressed certainty in regards to a turnaround, investors seem to be purchasing none of it, and the stock is exchanging at the lower end of its 52-week low. A testing nature, lower shopping center activity and unseasonable climate amid the first quarter harm Aeropostale. In any case, there are more extensive trends influencing the retailer.

A study has uncovered that they probably won't require malls to socialize and their clothing inclination is currently focused on singularity and uniqueness. Aeropostale is taking various initiatives, which incorporate adjusting its money related structure, quickening customer reception, changing brand sentiment, and adjusting operationally to the current nature. These factors are required to assume decisive part in its turnaround.

Strategies

The organization plans to venture into extra sub-labels so as to give separation and uniqueness to customers.

Aeropostale has also chosen to close around 125 shopping center-based P.S. locations before the end of fiscal 2014 so as to adjust to consumers' changing shopping patterns. In comparison, it will now look at the P.S. mark through various different sales channels such as off-shopping center locations, e-business, and worldwide licensing. Administration believes that this will result in a more profitable business than the current model.

Aeropostale has also dispatched another brand crusade, which will highlight it in a totally new way. This new brand battle will distinguish Aeropostale as a famous American mark that caters to Gen Z customers, and evokes a sense of vitality and positive spirit. Administration is of the notion that this new battle will highlight the changes that Aeropostale has made to its brand, and eventually pull in new customers, especially the teens.

Aeropostale is making moves to deal with its expenses productively. These savings will help the organization enhance its bottom line performance going ahead.

Peers are fit as a fiddle now

For instance, American Eagle is running a purchase online and ship-from-store experimental run program, which has gotten positive input. The organization is also cutting down inventories and enhance its evaluating strategy by running selected promotions, enhancing item assortment, and focus on applicable showcasing events.

What's more, American Eagle is streamlining its operations and is restructuring the business to take out redundancies in the sales channel. It has also improved its online site to incorporate enhanced item displays and better route.

In the interim, Abercrombie is improving even by decreasing the use of its logo in its merchandise as it were. Abercrombie is presently testing every last bit of its item categories without using its logo with a specific end goal to understand the interest patterns. Besides, as Abercrombie plans to sell its merchandize through online retailers going ahead, it may keep making strides.

Conclusion

Aeropostale shares are down more than 60% so far in 2014, yet further downside can't be precluded. Its peers are fit as a fiddle and may keep pressurizing Aeropostale with their strategies. As such, investors should consider staying far from Aeropostale until and unless the organization's turnaround efforts prove to be fruitful.


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK