Aeropostale Valuation
Executive Summary
Since its’ inception in 1987, Aéropostale, named after the 1920s French airmail firm, has become one of the leaders in designing, making and retailing of teen casual apparel and accessories. Aéropostale stores are primarily located in malls, shopping plazas and large outlet centers where they can best reach their teen clientele. The company’s main competitors include other clothing brands that cater to teens. Some of these competitors that we considered for Part I of this analysis were Gap Inc. , Abercrombie, Forever 21, Express Inc., and American Eagle Outfitters. During our analysis of historical and current financial performance of Aeropostale, we found out that the main triggers of revenue growth for the company are the sales in the same store as well as opening of new stores. Another factor that contributes to Aeropostale’s performance, is the efficiency of its’ supply chain which ensures that products that are in high demand could be quickly delivered from the vendors, to distribution centers strategically located across the US, to the retail stores where the items are needed. With the DCF analysis providing us with the valuation of $2459.6, and the target share price of $29.8, we believe that Aeropostale is in a strong position which further demonstrated by the revenues that are growing at an average rate of 18% and the growth in sales which primarily is attributed to growth in same store sales by 10% year over year, average growth of 7% in store square footage (through new stores) and a 48% increase in Aeropostale’s online sales. Using the EV/ EBITDA multiple, we obtained Aeropostale’s Enterprise Value for 2011 and 2012. The value for 2011 was 3725.80; expected value per share was $36.38. From the price obtained we could see that the company is under-valued by the market. Aeropostale also has a 1.46 book to market ratio meaning that the market value is less than its assets value. These findings support our recommendation to buy the
Since its’ inception in 1987, Aéropostale, named after the 1920s French airmail firm, has become one of the leaders in designing, making and retailing of teen casual apparel and accessories. Aéropostale stores are primarily located in malls, shopping plazas and large outlet centers where they can best reach their teen clientele. The company’s main competitors include other clothing brands that cater to teens. Some of these competitors that we considered for Part I of this analysis were Gap Inc. , Abercrombie, Forever 21, Express Inc., and American Eagle Outfitters. During our analysis of historical and current financial performance of Aeropostale, we found out that the main triggers of revenue growth for the company are the sales in the same store as well as opening of new stores. Another factor that contributes to Aeropostale’s performance, is the efficiency of its’ supply chain which ensures that products that are in high demand could be quickly delivered from the vendors, to distribution centers strategically located across the US, to the retail stores where the items are needed. With the DCF analysis providing us with the valuation of $2459.6, and the target share price of $29.8, we believe that Aeropostale is in a strong position which further demonstrated by the revenues that are growing at an average rate of 18% and the growth in sales which primarily is attributed to growth in same store sales by 10% year over year, average growth of 7% in store square footage (through new stores) and a 48% increase in Aeropostale’s online sales. Using the EV/ EBITDA multiple, we obtained Aeropostale’s Enterprise Value for 2011 and 2012. The value for 2011 was 3725.80; expected value per share was $36.38. From the price obtained we could see that the company is under-valued by the market. Aeropostale also has a 1.46 book to market ratio meaning that the market value is less than its assets value. These findings support our recommendation to buy the