Signed, sealed, but not delivering...

(ARO) used to be one of my favorite stocks in my portfolio. It was one of those that you consistently ignore, but always managed to stay positive. Until now. ARO hit a new 52-week low yet again (it was at a 52-week low just on Friday too), stemming from yet another downgrade. Prudential downgraded ARO's shares this morning, saying "[ARO] has too much inventory, is over-assorted and is coming off of historically high operating margins".

Compared to last year, Aeropostale is a completely different company. Last year, it consistently beat estimates and had higher and higher same-store sales percentages. This year, same store sales are on the decline - massively. On one hand, I understand certain pressures Aeropostale might be feeling to perform well. But on the other hand, (as a shopper of Aeropostale too) I want to scream "If your clothes aren't selling, CHANGE THE DESIGNS!"

It must be hard being a teen retailer. They have to cater to a generation of people whose styles change faster than a speeding bullet. Sure, it can be hard. Their stale designs (in my opinion) of the season can be seen from the horrific 81.5% increase in inventory from April to July. But if the fickle teen mind is to be blamed for Aeropostale's stale sales, than why aren't more teen retailers suffering like Aeropostale is suffering?

While Aeropostale reported September same store sales down 4.2%, their competitor American Eagle Outfitters (AEOS) saw same store sales increase 13%. When comparing both companies, their P/E's are relatively the same - ARO is 13.80 and AEOS is 13.90. Although American Eagle is relatively a hair more expensive, I think it can offer more right now. Not only does AEOS pay some dividends, but their board just completed a 3.5 million share buyback and already authorized to buyback another 2.5 million shares.

I complain about Aeropostale a lot, but that's because I expect a lot out of my companies. And for now, I'm not giving up on it. While it may not be time for me to sell my shares, it might be a good opportunity to start looking at the current enemy...