Aéropostale Inc. is stressing value in a sluggish economy, and consumers seem to be getting the message.
With the appointment of Mindy Meads as chief merchandising officer last year, the teen retailer has focused on balancing core basics with fashion silhouettes, while still remaining true to its mission of delivering value-priced product.
Once a laggard in fashion, Aéropostale reassessed itself.
"Most retailers are afraid to criticize themselves," Julian Geiger, chairman and chief executive officer, told WWD. "We are not afraid to look at our formula and see what needs to be changed."
The company has been trying to revitalize its core concept for more than a year, but the holiday season was the turning point.
While most retailers were promotional this holiday, Meads said, Aéropostale was able to deliver its usual competitive prices, but this time with trend-right merchandise.
Aéropostale on Thursday reported a 25 percent surge in April same-store sales and raised first-quarter guidance. The company now expects earnings of about 25 cents a diluted share, from a previous forecast of 20 cents to 22 cents. Rivals American Eagle Outfitters Inc. and Abercrombie & Fitch reported April same-store sales growth of 2 and 6 percent, respectively.
"We are better positioned today, even during the challenging economic time," Geiger said.
The retailer "sold 40 percent more T-shirts with our logo in one week in December than all of 1996," he said.
In the fourth quarter, earnings grew 12.9 percent to $64.7 million, or 95 cents a diluted share, from $57.3 million, or 72 cents, in the year-ago period. Sales for the quarter shot up 16.7 percent to $591.3 million from $506.8 million, and same-store sales gained 9.2 percent.
Wall Street is taking notice.
Shares of the company are up 29 percent for the year-to-date period, closing at $33.85 on Friday, compared with $26.18 on Jan. 2.
Now that the core concept appears to be on track, management is looking to rejuvenate its Jimmy'Z chain and add a third concept to its portfolio. Jimmy'Z, a 14-store group targeting the post-college set, launched in 2004 and was intended to provide full-priced items that were "young Hollywood."Unsuccessful, management adopted a West Coast surfer vibe. The concept is also more promotional. Although Geiger said he is encouraged by the results of the fall season, there are no plans to open more stores this year.
Like American Eagle's Martin + Osa and Abercrombie's Ruehl, Jimmy'Z has had its share of pitfalls. Targeting the contemporary demographic has proved a challenge, but analysts said it has the potential to carve a spot in the market.
"The demographic is a good one," said Howard Tubin, retail analyst at RBC Capital Markets. "It is an underserved age group. They haven't grown up shopping in department stores. They are less focused on a brand then getting interesting fashion."
Aéropostale will also aim younger with a new concept to launch at the end of 2009. Although the company did not reveal the exact demographic, analysts expect it to target children.
Aéropostale will be up against Abercrombie's kids' line, American Eagle's 77kids, J. Crew Group's Crewcuts, Gymboree and The Children's Place. But Tubin believes they can each bring something different to the table.
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