Aeropostale (ARO) , already dominating the teen market, is launching its battle for the hearts and minds of children today.
The teen apparel retailer opened its first P.S. from Aeropostale store in the Palisades Mall in New York on Thursday. The chain will target the 7- to 12-year-old brothers and sisters of the core Aeropostale demographic.
The company plans to open about nine additional stores, mostly in the New York metropolitan area, during the year. It will also roll out an e-commerce site, www.ps4u.com. Management emphasized that this is not a test concept like its failed Jimmy'Z chain, which shuttered in February.
"We are taking all of the success of Aeropostale -- both operational and merchandising -- and making modifications to fit the younger demographic," CEO Julian Geiger said
. "There is a void in the market for this demographic of fashionable clothes at value prices. We have the advantage of already having built-in recognition with moms and kids."
P.S. will play on Aeropostale's promotional pricing, with comparable items about 10% to 15% lower than the core brand. By utilizing 90% of Aeropostale's fabrics, it will help boost product margins.
While it might seem odd that anyone would open a new chain in the current environment, Aeropostale, which remains
one of the only players in the retail space still thriving
, apparently considers now the ideal time to expand.
The core concept is nowhere near saturation, with only 881 stores in the United States, Canada and Puerto Rico (in comparison,
Abercrombie & Fitch
has 1,112 stores and
American Eagle Outfitters
operates 1,118 stores). And the P.S. chain should allow the company to jump-start material growth before Aeropostale begins to slow.
Management believes the market represents a $14 billion opportunity and that the concept can potentially expand to over 500 stores. Analysts say it could eventually be as big as Aeropostale.
Aeropostale will, of course, compete with a handful of other players in their price category, including
. There is also substantial opportunity to take away market share from higher-priced children's concepts like
Abercrombie & Fitch's
"With very few players expanding, the level of vacancies has continued to creep up at the mall," Eric Beder, analyst at Brean Murray, Carret wrote in a note on Thursday. "We believe this has offered aggressive players the ability to acquire premium space in strong malls at fair pricing, which should result in stronger returns longer term."
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