Challenge In Sourcing And Competition Intensifying For ARO

Analysts at Piper Jaffray reiterate their "neutral" rating on Aeropostale Inc ARO, while raising their estimates for the company. The target price for ARO has been raised from $33 to $34. According to Piper Jaffray, “Fashion influences for BTS include the nostalgic and preppy "American Spirit" and "Ivy League." Key looks target denim, especially distressed denim and the skinny jean/jegging, woven plaids, knits, and graphic Ts. Skirts are trending better than dresses and ARO is embracing color. Similar to Gap Inc., ARO is zeroing in on the fit of its bottoms to gain more marketshare.” “From our perspective, the fashions looked appealing and well-merchandised and should generate positive raves from the teen sector…. We think this will be one of the keys for a successful season - the ability to react and properly time consumers' need-based buying, which is enhanced during value cycles,” the analysts mention. Piper adds, “ARO's pricing differential is now 10%-20% versus a 40%-50% differential 6 months ago, and sourcing may present a challenge in upcoming deliveries (although BTS sourcing costs were unaffected). As well, management acknowledged what we have been hearing concerning the aggressive and competitive retail environment.” Piper Jaffray has raised its EPS estimates for FY11 and FY12 from $2.80 to $2.86 and from $2.98 to $3.10, respectively, given the “strong same store sales trends quarter-to-date, coupled with strict inventory management coming out of FQ1, with inventory per store down 9%.” More Analyst Ratings here