Aeropostale (ARO) is another teen retailer that never came back from the last recession. But as Thursday’s results will show, Aeropostale and ARO stock are in much deeper trouble than American Eagle.
ARO stock is off more than 50% for the year-to-date alone, and 70% over the past 52 weeks. Meanwhile, Aeropostale is closing stores and cutting employees, but it remains to be seen whether its new strategy can work. Aeropostale, which is currently dependent on mall traffic, wants to focus on off-mall locations, international operations and e-commerce.
Good luck with that.
Wall Street expects ARO to post a much wider loss this quarter: 70 cents vs. a loss of 16 cents a year ago. Sales are tumbling and will continue to do so. Revenue is forecast to drop 10% year-over-year. If Aeropostale can turn itself around before it runs out of cash, there will be big upside in ARO stock.
Unfortunately, bankruptcy looks like the more likely outcome.
As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.