FOLLOW-UP: 'P.S., we're going after the tweens'

TRADING MARKETS.COM

Teen retailer Aeropostale Inc. is sizing up a younger customer, and analysts are calling it a perfect fit.

The clothing seller has created a new chain for kids ages 7 to 12 and plans to use New Jersey as the concept's primary launching pad.

The new chain, called P.S. from Aeropostale, targets the slightly younger siblings of the core Aeropostale teenaged customers, ages 14 to 17. That age group, 7 to 12, dubbed "tweens" for the years between early childhood and teenager, doesn't have a mall store to call its own, and Aeropostale aims to give them one.

"It's a bit of an untapped market overall," said Tom Johnson, chief operating officer of Aeropostale. "It's a $14 billion market which we think is really an opportunity for us.

"For years we've been seeing the younger siblings of our current Aero customers desperately trying to wear Aero. They desperately wanted to be like their bigger brother or sister. So we thought it's a natural extention for us to do that."

While other chains, such as Limited Too, now known as Justice, have focused on tween girls, P.S. from Aeropostale has clothing for both boys and girls. The 7aEUR"12 boy in particular, Johnson said, "certainly doesn't have many places to go" for clothes dedicated to his age group.

Aeropostale also will be competing with stores that sell to the 7-12 segment but don't focus exclusively on it, such as The Children's Place, Old Navy and Gap Kids, as well as Target, Wal-Mart and Kohl's.

The first New Jersey P.S. from Aeropostale store opened this month at Willowbrook Mall in Wayne. The Willowbrook store is the second in what Aeropostale executives envision will be a chain that could eventually include as many as 500 stores. Six more P.S. from Aeropostale stores are planned to open in New Jersey malls by the end of the year.

New York-based Aeropostale has some corporate offices in Wayne, next to Willowbrook, and the company wanted the first group of P.S. stores to be close enough for frequent visits by executives. "We're focusing on the New Jersey market so we can get to the locations and make sure that we understand the customer's reaction, our reaction, the marketing, the pricing, the promoting ... everything," Johnson said.

Aeropostale has been flying high as other teen and apparel retailers have faltered during the economic downturn. Its June same-store sales -- sales at stores open at least a year -- were up 12 percent during a month when competitors were down: Abercrombie & Fitch was down 32 percent, and Gap Inc. was down 10 percent.

The secret to Aeropostale's success has been capturing cost-conscious teen consumers and their parents. Its niche as a fashionable but affordable alternative to stores such as Abercrombie & Fitch and Hollister has helped it grow sales in the midst of a spending downturn.

The first P.S. store opened at Palisades Center Mall in West Nyack, N.Y., in June, and analysts were impressed with the new concept. Howard Tubin of RBC Capital Markets, in a note to investors, called the new store "kid cool, mom friendly" and said, "Based on what we saw so far of this new concept and the strong momentum in the core [Aeropostale] brand, we believe [Aeropostale's] market share gains can continue." Sterne Agee analysts Margaret Whitfield and Jennifer Milan reported, "P.S. looks like a winner," praising the strong product mix and value-oriented prices.

The Willowbrook store as well is getting rave reviews from another group that Aeropostale executives are eager to impress -- the kids. "This is awesome," yelled Andrew Bandala, 8, of Butler, as he bounced onto the bright red couch outside of the fitting rooms. The seating area is equipped with Dr. Seuss-like speaker tubes that let parents waiting outside communicate with children in the fitting rooms.

Andrew and his brother Matthew, 6, also were impressed with a mirror in the middle of the store with a camera embedded that lets kids take their picture and display it with various special effects. "Cool!" the boys shouted as they struck various superhero poses for the camera. Their father, Alejandro, was helping older brother Alexander, 9, try on polo shirts and said he was impressed with the store's design and the merchandise.

Johnson said Aeropostale wanted to create a store that appealed to both kids and parents. The stores, which average 3,500 square feet, were designed to be bright and well-lit to help moms and dads read labels, but with fun features for the kids. "The store and the product really needed to resonate with both the mom and the kid," he said.

The company expects to have about 14 P.S. stores open by the end of the year, and sees the potential for 500 stores eventually. "We are definitely looking at this as a go-forward business and not as a test," Johnson said. "Based on what we believe is the need in the marketplace, it could be a very big business."

E-mail: verdon@northjersey.com