Aeropostale (ARO), a mall business whose related stocks include Gap (GPS) and American Eagle Outfitters (AEO), closed up over 4% at the end of Monday's trading session. The catalyst? According to the corporate press release, management has decided to allocate an additional $250 million to its share buyback program.
This is very interesting news because the big question on every investor's mind has to do with the current holiday season. How well will retailers fare during Christmas? Or, more accurately, will Christmas be as bad as everyone thinks it will be?
Actually, there are many out there who do think that this shopping season won't be so painful. They can be found walking the halls of all the powerful financial institutions that have been fueling the ongoing rally in the markets.
Since the major indexes are holding up relatively well at the moment, does a stock like Aeropostale make sense to buy? Shares are off the 52-week high of $44.85 and are closer to $30 at the time of this writing. Fundamentally, Aeropostale does score a few points. Trey Thoelcke reported on the company's recent earnings report. Same-store sales and earnings growth were impressive. Back in the summer, I found myself enjoying the Q2 release.
Will this buyback news send the stock higher over the next few months? It's difficult to say. Management obviously believes the shares are a value. I do, too.
Yet, a decent Christmas season is not a done deal. There is a lot of risk here. Buying Aeropostale isn't like buying a Wal-Mart (WMT) or a Target (TGT). Plus, the company did report a bad comps number in October.
Still, I think any investor who enjoys searching the retail sector for ideas has to reserve due-diligence time for Aeropostale.
Disclosure: I don't own any company mentioned; positions can change without notice.
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