Friday, January 11, 2013

StoreIntel Recap January 11, 2013

  • Aeropostale, American Eagle - We were not surprised by the holiday reports from both ARO and AEO yesterday. We have been a major advocate for AEO on the positive side since our December 18th mall walk, having reiterated our stance again on December 31st. ARO is going to the well much too often with uninspired styling, and we see no noticeable product improvement on the horizon. We remain negative on the name for the foreseeable future - at least through the end of March, unless some significant improvement occurs in their assortment very soon. The production cycle is at a minimum 90-120 days for off-shore product (ARO produces almost all their product off-shore), and with very little inspiring product in their resort groupings, we have our reservations that their first spring roll-out will be dramatically different. AEO, on the other hand, commented on the strong response to spring 2013 assortment to date, and we feel this will only improve as we move forward into the spring season. While the stock has responded negatively on a top line sales and margin issue, American Eagle is in very good shape to grab additional shares of this teen sector.
  • Ascena Retail Group - This is a name we have been working diligently on with our clients. We have been disappointed with their holiday assortments, particularly at Lane Bryant, Catherines and Dress Barn. These three divisions rely on a strong holiday to give them the right direction for their spring product. Holiday 2011 was a resounding success for them, with a plus 10 comp and set up for a very strong 2012. A complete reorganization of the merchandising teams at Dress Barn, which included elimination of their plus size team, has had a negative effect. The introduction of the “ali and roz” label has created some confusion amongst their customers. Both Lane Bryant and Catherines are working too independently of the market. All product is done in house, and we feel lacks the connection to their core customer. Dress Barn’s success historically has been in part due to their close relationships with the market. Their use of domestic resources has kept their assortment s current and on trend. We would like to sit on the sideline with ASNA for the time being.
  • JC Penney - As we had stated in our mall walk of December 18th we are extremely negative on the name. We would not be surprised from our research to see JCP comp even worse than Q3 which was a negative 26.6%. We don’t see any reason on the near term to become excited about this name.

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