Wall Street-esque session

Wednesday, 05 October 2011

In a clearly Wall Street oriented session, Aeropostale’s stock has taken a beating over the past few months, dropping from $25.49 on May 4 to the current price of close to $11.

“We expect Aeropostale to bounce back strongly in the coming quarterlies and are predicting an approximate increase of 150%” advanced from Zacks. According to Zacks Investments, Aeropostale strives to provide fashionable clothing at a reasonable price and much of their appeal to teenagers comes from price undercuts compared to more prestigious brands like Abercrombie & Fitch. As cotton prices soared to $2.30 in March 2011, many companies chose to pass on the costs to the consumer in the face of such economic difficulties. Aeropostale was unable to respond to the sky-high cotton prices in this manner without compromising its business model. Another of yesterday´s stocks on the move was True Religion Apparel, up 7.5% to $27.09. The Dow Jones Industrial Average was now trading 0.6% lower to 10,588 and the S&P was trading fractionally higher to 1,101.

Main sportswear manufacturers were in the limelight as Adidas and Nike rethink their respective contracts with the NBA. Adidas—the world’s second-largest sporting goods brand after Nike—is in the fifth year of a reported $400 million, 11-year deal to be the NBA’s official uniform and apparel supplier. That means Adidas pays the league an average of $36 million for the rights to design, manufacture and market all league apparel, including game uniforms.


"Clearly, Adidas has much more direct loss in the sense that the NBA apparel license would be basically dormant" if a season was lost, said John Horan, publisher of Sporting Goods Intelligence, an industry news and research company. According to analysts, it’s unclear whether Adidas’ contract with the league offers any contingency plans in the event of a work stoppage. Lawrence Norman, vice president of Adidas’ global basketball division, which is based out of Adidas America Inc. in Portland, said the company’s basketball business grew 25 percent in the last quarter and he’s confident that the momentum will continue.

In the same vein, Nike’s basketball business generated $1.9 billion in sales last year, up 11 percent, accounting for nearly 10 percent of the company’s $18.1 billion in annual revenue.

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