(B)(N) ARO Aeropostale Incorporated

Courtesy: Aeropostale Incorporated

Drama. Aeropostale has a new pilot, Mr. Julian Geiger, who returns and replaces CEO Thomas Johnson, of less than four years at the helm (BusinessInsider, August 18, 2014, Aeropostale’s CEO Is Out And This Horrific Chart Is His Legacy).

Figure 1: ARO Aeropostale Operating Profit & Earnings

Yes, it’s true that the stock price has lost more then 85% of its value during that time (ibid, BusinessInsider).

And, yes, it’s true that the gross operating profit and the earnings have descended even faster; please see Figure 1 on the left and Exhibit 2 below for the Risk Price Chart.

The Risk Price (SF) has kept us out of it, and it does so now at $9, even though the stock has been trading aggressively for the past few days between $3.50 and the current $3.25. It doesn’t pay a dividend, and our estimate of the downside in the stock price is minus (-$2.50) in the next quarter, based on the demonstrated stock price volatility.

Nevertheless, the fundamentals are not atypical, and the store is very comparable to the other brand-name stores in the U.S. retail industry – which might one day be popular again – please see our recent Post “(B)(N) BONT Bon-Ton Stores Incorporated” for additional speculation on the sector.

Aeropostale has the strongest balance sheet, with a modality of α=1.61, and the risk to the shareholders equity (N/N*) is negative (-0.27) which is the best, and next to Best Buy (-0.07) and J.C. Penney (-0.47). These companies become investments once the risk is positive – and we know how to deal with those – safe, liquid, and hopeful – those are the words that move us.

However, the facts seldom deter investors from doing what they will, and praying for a good outcome – which happens about half the time – and the next “half-time” is on Thursday (this week). But the clothes, the clothes – are amazing!

Exhibit 1: (B)(N) U.S. Retail Value Trap – Fundamentals

US Retail Value Trap – Fundamentals – With ARO

Exhibit 2: (B)(N) ARO Aeropostale Incorporated – Risk Price Chart

(B)(N) ARO Aeropostale Incorporated

Aeropostale Incorporated operates as a mall-based specialty retailer of casual apparel and accessories for young women and men in the United States.

From the Company: Aéropostale Incorporated, together with its subsidiaries, operates as a mall-based specialty retailer of casual apparel and accessories. It provides a collection of apparel, including graphic t-shirts, tops, bottoms, sweaters, jeans, outerwear, and accessories for 14 to 17 year-old young women and men. The company also offers casual clothing and accessories focusing on kids between the ages of 4 and 12. As of March 13, 2014, it operated 864 Aeropostale stores in 50 states and Puerto Rico, 78 Aeropostale stores in Canada, and 151 P.S. from Aeropostale stores in 31 states and Puerto Rico. In addition, Aéropostale, Inc. markets its products through its Websites, http://www.ps4u.com, and http://www.aeropostale.com, as well as its licensees operate 95 Aeropostale stores, and 1 Aeropostale and P.S. from Aeropostale combination store in the Middle East, Asia, Europe, and Latin America under various licensing agreements. The company also sells fashion footwear, contemporary apparel, and other accessories through GoJane.com. It has a strategic partnership with Sycamore Partners and MGF Sourcing. The company was formerly known as MSS-Delaware, Inc. and changed its name to Aéropostale, Inc. in February 2000. Aéropostale, Inc. was founded in 1987, has 3,900 employees, and is headquartered in New York, New York.

For more information on real “risk management” and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“; we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And for more on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100. And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

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Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”. Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability. We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now. The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”, ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.