Moving back into our focus on Apparel Retailers this week, we spoke to Linda Tsai- an analyst who covers the teen and children’s apparel space. She had one top pick out of all apparel retailers in this tough time: Aeropostale (ARO).
Ms. Tsai: I like Aeropostale a lot. We talked a little about that because theyhave been improving their fashions over the past few years. A larger percentage of their merchandise mix used to be dedicated to what they call “core,” which are their basic categories like a plain tank or a plain pair of jeans. Over time they’ve increased the percentage of their “fashion” category. Fashion, despite carrying a slightly higher price point, allows them to drive demand because of a higher level of differentiation. For example, let’s say one year a shopper goes there and sees a pink tank top, but the next season it’s the pink tank top with a ruffle. You see the same style at its competitors but it’s priced a lot less. You will spend the extra dollar to get the ruffle because that’s something that you want. That’s one thing they have gotten really strong at in terms of understanding fashion trends and interpreting them, so that price-wise it remains accessible to its core customer, but still commands a slightly higher price point. That’s one of the reasons why I think they are positioned to take share.
For the full interview with Ms. Tsai, including a complete overview of the teen and children apparel space, and an outlook for 2008, click here.
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