Tomahawk, WI 9/18/2013 (BasicsMedia) – Aeropostale Inc (NYSE:ARO) has focused primarily on producing apparels for boys and girls aged between 14-17 years, who can purchase them from its Aeropostale stores, and the 4-12 year olds, who can buy theirs from its P.S from Aeropostale stores. It currently operates close to 86 stores in 50 states in the U.S. It also has a substantial presence in Puerto Rico and Canada. It also runs similar stores both in the Middle East as well as the South East Asia region. The company’s stock has been one of the major movers in the market. What has contributed to this?

ARO Loses its Market Share

The company has suffered a lot in the last few years to a point where many analysts, opine that it may have lost a sizeable chunk of its market share. The company has tended to over-rely on basic apparels and this could be one of the reasons why it has struggled thus far. One only hopes that the stock will perform much better now that Sycamore Fund has reportedly acquired a 7.9% stake in this company after buying 6.25 million shares. Sycamore’s stake at ARO is valued at around $53.9 million and it says that it found this stock to be attractive, hence the investment.

ARO Continues to Report Losses

Recently, ARO announced its latest financial results which indicate that it suffered net losses amounting to $33.7 million. Several reasons have been put up for this not-so-pleasant outlook of the company. The reasons range from the teen retail environment which the company seeks to operate under, but is quite difficult to navigate. The high levels of promotional activities being undertaken by ARO have also played a major role in attracting the losses. The traffic trends are quite weak, and this has negatively affected the company’s ability to make profits in 2013.

Quite a substantial portion of ARO’s business is accounted for by the women apparels it sells. This division has struggled quite a lot of late and until the business finds a way of resolving the mess found therein, its struggles won’t cease. The back-to-school campaigns have to be reorganized in order for ARO to make money as a business and prove that it is still attractive to other investors. These are the short term activities which the company can embark upon thus helping it to see a turnaround in its financials. It has to compliment these with long term goals.

ARO Has to Invest in its E-Commerce Division

If ARO invests well in growing its e-commerce division, there is likelihood that it could soon start enjoying better sales, which will have a positive bearing on its revenues and profits. Once again, let me reiterate that if the company chooses to lay special emphasis on growing its women merchandise, it will start enjoying better sales, since this accounts for up to 65% of all its revenue. The company’s overreliance on its basic apparels has to be evaluated. It must work on coming up with new products if it hopes to see significantly positive changes in its financials.

Sycamore’s investment in ARO offers hope where there had probably been none. This injection of funds into ARO may just be the catalyst it needed to see a turnaround in its fortunes.

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