Aeropostale boasts the lowest prices of the main players in the teen apparel market, which give the firm an advantage in the current economic slowdown as teen's already small disposable income shrinks as their parents cut back on spending. In addition, the company has no debt and $100 million in free cash flow, putting ARO in a very strong positioon to do well in 2009 compared to other retailers.
Aeropostale will launch a new concept brand in 2009 designed for children. This new source of revenue could significantly help broaden Aeropostale's target market. The move follows the footsteps of Aeropostale's competitor, Abercrombie & Fitch, which operates a well-established children's brand, "abercrombie".
Aeropostale's revenues and net income have increased in 2008 and throughout 2009 while competitors such as American Eagle and Gap have seen overall decreases. The company's lower price point makes it very attractive to consumers looking to cut down. The continued global recession, combined with Aeropostale's recent international expansion in Dubai, will serve to only bolster its sales.
During the recession, ARO previously experienced sales growth as consumers favored value based retailers, such as ARO, as opposed to brand based retailers. However, with the economic recovery, ARO may experience a slowdown in revenue growth as consumers upgrade to higher priced retailers. Nevertheless, revenue per square foot is expected to grow as ARO had significant gains in market share and brand value during the economic crisis. As a result, it is in a good position to leverage its market strategy to continue its sales growth even during the economic recovery.