Why Aeropostale Shares Dropped and Then Recovered


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen clothing retailer Aeropostale fell as much as 11% on poor holiday sales today, before recovering most of those losses by the end of the session.

So what: Sales for the nine-week period ending December 29, 2012 fell 6%, compared with a year ago, to $645 million, and comps fell 9% during that time. CEO Thomas Johnson said "traffic trends deteriorated significantly in December" after a strong Black Friday weekend, and the company scaled back EPS sharply to $0.20 to $0.24 from $0.36 to $0.41.

Now what: While this was clearly a bad report, the stock's recovery indicates that a slowdown in sales was probably already priced in. Still, the holiday season is crucial for retailers, and Aeropostale seems to be losing ground to rivals like Abercombie & Fitch and American Eagle. This was the second year in a row that comparable sales fell sharply, which bodes poorly for the rest of the year. I'd stay away until that trend reverses.

Don't miss the next update on Aeropostale.

The article Why Aeropostale Shares Dropped and Then Recovered originally appeared on Fool.com.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of Aeropostale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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