Teen Queen Aeropostale Earns Its Crown

Last week, I let you in on how to avoid the land mines in the electronics retail space and pointed out that shares of old-school electronics retailer RadioShack (RSH - commentary - Cramer's Take) looked poised for a move up. Now it's time to turn our attention to another retail subsector that's loaded with a ton of wannabes: the slick land of teen apparel retailers. And one of these players -- Aeropostale (ARO - commentary - Cramer's Take) -- has the right look.

Teen Apparel: Buyer Beware

Behind the glossy advertising, the superscrubbed models and the flashy, cutting-edge apparel and accessories, the business of teen apparel is littered with casualties. Just take a quick peek at the long-term charts of Hot Topic (HOTT - commentary - Cramer's Take), Pacific Sunwear (PSUN - commentary - Cramer's Take) and Wet Seal (WTSLA - commentary - Cramer's Take) to see how tough this niche can be.

It's not due solely to poor management, though that is frequently a factor. Teen apparel retailers have a hard row to hoe. They have to make predictions about what fashions will be hot next season without much of a barometer beyond instinct and experience. Sure, they have their analytics. But buyers at these retailers have a tough job made more hazardous by the fickle nature of teen shoppers.

That's why I prefer to focus on apparel retailers that have stood the test of time such as Polo Ralph Lauren (RL - commentary - Cramer's Take) -- the most iconic of all American "lifestyle" retailers -- which I wrote about back in December when shares were trading around $82. Given the recent price of about $93, things there are humming along nicely.

But it doesn't always work out that way. I also liked teen apparel retailer American Eagle Outfitters (AEO - commentary - Cramer's Take) back in November when the shares cost about $32. While I still like the stock's prospects, it certainly hasn't taken off like I hoped. Shares are currently trading down around $28 and change.

The bottom line is that when it comes to apparel retailers, those that have performed well over a substantial time period have proven they can bob and weave with the best of them in this fickle, high-strung market. My next pick -- Aeropostale -- has proven just that.

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At the time of publication, Burritt had no positions in any of the stocks mentioned in this column, although positions may change at any time. Wayne Burritt is president and director of equity research for Burritt Research, which operates BurrittResearch.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Burritt appreciates your feedback; click here to send him an email.