Year-to-date return: -22%
Before yesterday, teen retailer Aeropostale (ARO) was sitting an ugly 34% in the red. In fact, the stock’s five-year annualized total return is almost 19% in the red — the mirror opposite of the broader group of apparel stores.
In the eyes of many experts, that’s made Aeropostale an attractive value play. Seeking Alpha contributor Tim Travis, for one, is a deep value investor who wrote in early September:
“ARO is bleeding but not broken … The company’s sterling balance sheet and low valuation make it an attractive LBO target in a low interest rate environment.”
It turns out somebody was listening. Aeropostale’s stock jumped over 18% in trading yesterday on news that Sycamore Partners has taken an 8% stake in the company and is exploring all of its options for jumpstarting the retailer.
While that still leaves ARO around 22% in the red year-to-date, and while it’s possible Sycamore could walk away from its investment in the future, it’s more likely the activist investor will move for significant change at Aeropostale. That alone should keep the stock price from backsliding into single digits.