Stifel Comments on Aeropostale (ARO) Post-Q2 Report; Maintains 'Hold' Rating

Stifel comments on Aeropostale (NYSE: ARO) following Q2 results issued Thursday night.

Analyst Richard Jaffe noted the following key points:

• Weakness Continues – Trends quarter to date are similar to 2Q. The company continues to achieve higher average unit retail and merchandise margins, however traffic and comp sales remain challenged (comps are expected to decline in the low double digits in 3Q). Management expects a 3Q loss per share of $0.44 to $0.48 vs. an adjusted $(0.29) LY. Consensus is at $(0.33).

• Challenged Not Only to Get Merchandise Right, But to Get Teens in the Store - We believe the company’s merchandise has improved with its fashion offerings (about 15%-20% of the merchandise assortment vs. fashion basics at 25%-30% and core at 50%-55% of the assortment) looking more on trend, especially the company’s sub-label brands Bethany Mota and Tokyo Darling. However, given the company’s consistently poor merchandise offerings over the past several years, we believe it will take time for ARO to win back its customers, despite the improving fashion assortment. The company launched a new advertising campaign to highlight the company’s differentiated, fashion focused merchandise late in the 2Q, however traffic has yet to improve.

• Reiterate Hold - While we believe the replacement of CEO Thomas Johnson is a positive, however it will take time for changes put in place by returning CEO Julian Geiger to come to fruition. We believe the reward potential is limited near term and risk remains significant, given the current fashion, merchandising, and retail consumer challenges.

For an analyst ratings summary and ratings history on Aeropostale, Inc. click here. For more ratings news on Aeropostale, Inc. click here.

Aeropostale, Inc. closed at $3.91 yesterday.

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