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UPDATE: Oppenheimer Downgrades Aeropostale as Company Transitions Business Model

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In a report published Thursday, Oppenheimer analyst Anna Andreeva downgraded the rating on Aeropostale (NYSE: ARO) from Outperform to Perform, and lowered the price target from $20.00 to $13.00.

In the report, Oppenheimer noted, β€œARO in theory should have one of the more intriguing operating margin recovery profiles in our space (EBIT margins sub-5% for the past two years, versus 16%-17% peaks in 2009-2010), although turnarounds take time as the company transitions the business model toward fashion and away from commodity basics. With the stock trading at 42x and 32x our revised 2013 and 2014 EPS estimates, to own ARO right now is to make a big bet that the new merchant's product (sets in July) will resonate in 2H13/2014, and for us, there's simply too little visibility to make that bet. Given the optionality of the turnaround against a backdrop of high productivity ($560/sq ft, still some of the best levels in consumer discretionary), and high inventory levels, ARO's multiple could sharply contract if the 2H13 recovery doesn't materialize. Recent private equity interest in the consumer discretionary space should continue to provide support in the near term, plus the stock is heavily shorted (short interest at 12% of the float, up 60% since the beginning of the year).”

Aeropostale closed on Wednesday at $13.75.

Posted-In: Anna Andreeva OppenheimerAnalyst Color Downgrades Analyst Ratings


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