NEW YORK - Aerpostale plunged 14% today on non significant information. Investors love to rally a stock or push it down on a quarter when its usually not very significant. Net income was marginally lower than that of last year at $58 million 61 cents a share compared to $62 million last year. Revenues grew to $602 million from $568 or 6%. Aero also reported that November sales increased 7%, but said comparable store sales were flat. This number is sometimes more concerning to investors as it indicates if the business is growing due to expansion or internally.
It surely makes Aeropostale a possible takeover target. With very little inventory, and a company which produces free cash flow of over $200 million and earnings expected to be $242 million for the year it does not seem real to see it trading at the low range of $2 billion. In comparison a company like Crocs has a $1.5 billion market capitalization with a less sustainable business model and less than 1/3 the earnings. Or a company like Deckers has $1 billion higher valuation with, 1/2 the earnings. Investors will scream growth, but all retail stocks eventually can grow no further due to eventually reaching saturation and this will likely soon happen to the other retail stocks.
To read the full Aeropostale report click here.
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