There’s no pleasing teens–or investors–as Aeropostale (ARO) is learning today.Bloomberg News
Shares of Aeropostale have dropped a whopping 25% to $3.41 after the teen retailer said its second quarter loss would come in between 55 cents to 61 cents a share, larger than the 51 cent loss predicted by economists. Aeropostale also said that it would burn through $70 million this quarter, though they would also get about $45 million from a tax refund.
RBC Capital Market’s Howard Tubin and Courtney Willson downgraded Aeropostale to Sector Perform from Outperform. They explain why:
To say our call on ARO shares has been bad would be a colossal understatement. We have stayed with it over the last several quarters because we believed and continue to believe that management is making the appropriate changes to the merchandise. Where we went wrong was in the timing. We expected the changes made in-store, online, and within the marketing strategies to have already gained traction. However, business remains difficult….In addition, their progress is being hampered by difficult business conditions in the teen space, overall. Hence, we are moving to the sidelines until we have more visibility on the improvement in business trends.
Interestingly, Aeropostale’s colossal drop hasn’t had much impact on other teen retailers today. American Eagle Outfitters (AEO) has gained 0.6% to $10.83 today, while Tilly’s (TLYS) has dropped 0.3% to $10.48, Abercrombie & Fitch (ANF) has declined 0.3% to $37.10, and Buckle (BKE) has fallen 2.1% to $45.10.