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Aeropostale (ARO) Increases Same-Store Sales – Covered Calls

Aeropostale (ARO) said on Thursday that its December sales at stores open at least one year rose by 12.2%. Analysts, on average, had expected its same-store sales to rise 3.7%, according to Thomson Financial. Total sales for the period ended January 5 surged 17.5 percent to $313.5 million from $266.7 million in the 2006 period ended December 30. Aeropostale said it expects to report fourth-quarter earnings of about 87 cents a share, above its prior guidance of 82 cents to 84 cents a share.

Same-store sales or sales at stores open at least a year, is a key indicator of retailer performance since it measures growth at existing stores rather than newly opened ones.

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Year-to-date, total net sales increased 13.8 percent to a record $1.51 billion, from $1.32 billion for the same period last year. Year-to-date, same-store sales increased 3.2 percent compared to the corresponding period ended Jan. 6, 2007. The increase in sales was due to the excellent response from its customers in each of the merchandise categories. The company currently operates over 800 Aéropostale stores in 47 states and Canada, and 14 Jimmy’Z stores in 11 states.

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Aeropostale is one of the smaller firms in the youth apparel retail sub-market. Aeropostale has grown its store base by about 20% per year since 2002, and it had about 825 stores by the end of the third quarter of fiscal 2007. Aeropostale’s major competitors include:

-Abercrombie & Fitch Company (ANF): Abercrombie & Fitch is the leader of the youth apparel retail market by nearly all measures. ANF is a larger company than ARO, with a greater store base and much higher net sales than ARO.

-American Eagle Outfitters (AEO): American Eagle competes directly for the same customers (young men and women between the ages of 15 and 25) with Aeropostale. AEO is larger than Aeropostale in terms of total sales and profits, and AEO has exhibited stronger growth recently than Aeropostale.

-Pacific Sunwear of California (PSUN): Pacific Sunwear primarily serves several different customer segments through its three retail chains: PacSun, demo, and One Thousand Steps. PacSun stores not only compete with Aeropostale’s namesake stores, but are a direct competitor to Aeropostale’s new Jimmy’Z concept in the surf-inspired merchandise market.

-Urban Outfitters (URBN): Urban Outfitters is a relatively young retailer that operates three different branded store chains, Urban Outfitters (18 to 30 year olds), Anthropologie (30 to 45 year old women), and Free People (16 to 35 year old women). Urban Outfitters is not as directly comparable to ARO due to its slight differentiation in targeted customer segments.

Covered Call Options:
A large number of Option Trading Tricks are available on PowerOptions website for Option Investors. Using the search results on the website, the following covered call opportunities for Aeropostale and its competitors were obtained.

PowerOptions covered call search
Option Strike
AEO 18.34 (+0.64) AEOBW 08 FEB 17.5 (33) 1.65 9 4.9 4.9
AEO 18.34 (+0.64) AEOBD 08 FEB 20.0 (33) 0.55 3 3.1 12.4
ANF 70.77 (-0.09) ANFBN 08 FEB 70.0 (33) 4.2 5.9 5.2 5.2
ANF 70.77 (-0.09) ANFBV 08 FEB 72.5 (33) 2.9 4.1 4.3 6.8
ARO 23.48 (-1.01) AROBX 08 FEB 22.5 (33) 2.35 10 6.5 6.5
ARO 23.48 (-1.01) AROBE 08 FEB 25.0 (33) 1.1 4.7 4.9 11.7
PSUN 10.77 (+0.09) PVQBB 08 FEB 10.0 (33) 1.25 11.6 5 5
PSUN 10.77 (+0.09) PVQBV 08 FEB 12.5 (33) 0.25 2.3 2.4 18.8
URBN 25.22 (-0.03) URQBE 08 FEB 25.0 (33) 1.9 7.5 7.2 7.2
(For more details click the ticker symbol above)

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[tags] Thomson Financial, Canada, Jimmy’Z, Urban Outfitters, Anthropologie, Free People, AEO, American Eagle Outfitters Inc., ANF, Abercrombie & Fitch Co., ARO, Aeropostale Inc., PSUN, Pacific Sunwear of Calif. Inc., URBN, Urban Outfitters Inc., covered call investment strategy, covered call options, covered call trading example, covered option example, investment strategy, iron condor, online option education, option investors, option trading tricks, poweroptions, stock option trading, stock options [/tags]

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