Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

reu21, inc. (RUE), Aeropostale, Inc. (ARO): Is This Stock Worth Buying?

Page 1 of 2

rue21, inc. (NASDAQ:RUE), a specialty apparel retailer, reported 4Q12 results with sales increasing 22.4% to $269 million, compared to consensus estimates of $203 million. Same-store sales edged up 0.5% as against expectations of negative low-single digits. Further, despite the promotional environment, gross margin improved 110 basis points to 37.6%. In line with its peers, it has guided for (2)% same store sales in 1Q13. Let us compare how the company fared as against peers:


Versus Aeropostale, Inc. (NYSE:ARO)

rue21, inc. (NASDAQ:RUE)’s key competitor, teen apparel retailer Aeropostale, Inc. (NYSE:ARO), swung to an operating loss in 4Q12 due to higher store asset impairment charges and weaker sales during the holiday season. Same-store sales also declined 8%. Further, citing margin pressures from carryover inventory from the holiday season and a weak economic environment, it guided towards a first-quarter loss of $0.15 to $0.20 a share (as compared to analyst expectations of a profit of $0.08 per share).

Aeropostale Inc (ARO)

The company has been facing challenges in its core business, especially its graphic T-shirt and fleece products. It has been trying to integrate more fashion in its product mix in order to attract its core target group of younger teens. Further, it also faces stiff competition from its higher-end rival, Abercrombie & Fitch Co. (NYSE:AMF), which promoted its products aggressively during the holiday season.


As against American Eagle Outfitters (NYSE:AEO)

On the other hand, its other key competitor American Eagle Outfitters reported strong 4Q12 results, with profit jumping a whopping 85%. Its sales increased 8.6%, with 4% growth in same-store sales. The company has been able to post strong 4Q results despite strong competition from rivals Abercrombie & Fitch Co. (NYSE:AMF) and Aeropostale, Inc. (NYSE:ARO). However, in line with its peers, it has also guided for lower 1Q results with EPS of $0.16 to $0.19, behind analysts’ expectations of $0.25.

What doesn’t work for rue21, inc. (NASDAG:RUE)?

It’s a tough competition between these three apparel retailers. rue21, inc. (NASDAQ:RUE) is much smaller in size when compared to its peers and has posted strong sales and EPS growth in the last five years. All three have a strong balance sheet with zero debt and strong cash balances.

Historically, Aeropostale, Inc. (NYSE:ARO) has done better than rue21, inc. (NASDAQ:RUE), but in the last two years, it has faced severe deterioration in its margins and sales as it tries to maintain its foothold among its competitors.

Page 1 of 2
Loading Comments...