Wunderlich: Aeropostale 'Weathering The Storm'
In a report titled, “Weathering the Storm,” Wunderlich initiated coverage of Aeropostale (NYSE: ARO) at Hold with a $3.50 price target.
“We believe there are encouraging signs, but not enough for us to become aggressive in the name.”
Shares of Aeropostale have been hit hard by the shift in teen retail to “fashion items,” to which it replied with significant price cuts. Shares are down 74.2 percent over the past year.
Regarding the turnaround, analyst Eric Beder wrote, “management has attempted to shift the mix to a slightly older, more fashion-forward teen customer; while there have been some hits (the Bethany Mota line), it has been very difficult to switch the current customer base in a period of near chaos in the sector.”
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With $150 million of financing from Sycamore Partners, Aeropostale has some room to experiment in the short term.
Further, Beder commented on the need for a pricing change. “More than any other player in our universe, Aero needs return to pricing integrity in the teen landscape to enable it to achieve some premium for their shift to a higher level of fashion items.”
Despite concerns, Wunderlich said that it may turn more aggressive on Aeropostale in the future.
Shares were last trading at $3.37, 3.9 percent below Wunderlich’s price target.
Latest Ratings for ARO
|Dec 2014||Morgan Stanley||Maintains||Underweight|
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