Samantha Martin ACG2021 Sec. 002

1. . Samantha Martin ACG2021 Sec. 002

2. Executive Summary • Overall, Aéropostale has had a great year with higher net income and lower liabilities. I would shop there because they have great-quality clothing. There is higher investors’ confidence and therefore, more revenue from stocks. Based on this information, I would invest in this company. The company is continuously growing and will continue to meet their goals in the future. Aéro has been very successful and is a great competitor to other companies in the fashion market! • Aéropostale's Annual Report

3. Introduction • CEO: Julian R. Geiger • Home office: • 112 West 34th Street, 22nd Floor, New York, NY, Zip: 10120 • Ending date of last fiscal year: January 31st , 2009 • “Aéropostale, Inc is a mall-based, specialty retailer of casual apparel and accessories, principally targeting 14- to 17-year-old young women and men. The Company provides customers with a focused selection of high-quality, active-oriented, fashion and fashion basic merchandise at compelling values.” • Aéropostale is a growing company, opening 89 new stores in 2008. There were over 900 total stores (in January 2008) in 48 states, Puerto Rico and Canada. Aéro’s main geographic area would be in Delaware, where it originated.

4. Audit Report • The independent auditors are Deloitte & Touche LLP • The auditors believe that Aéropostale is a strong, financially sound company and their numbers are in accordance with the GAAP. Aéro has a strong stock and has provided a nice amount of money for shareholders. However, because of the condition of the economy, and taking into account the fact that teens change their minds about fashion regularly, the stock and strength of earnings may decrease or increase in the future. In other words, the earnings and stock are somewhat volatile.

5. Stock Market Information • Most recent price of stock: $35.42 • 12 month trading range: $20.97 to $44.85 • No dividends paid • February 20th, 2010 • I think this would be a good stock to invest in (buy stock) because, as the trading range shows, there is still room for an increase in price and therefore a profit. Although the auditors said it was a somewhat volatile stock, in my opinion, since spring and summer are on their way, more people will become interested in Aéro and the stock will rise. I would definitely buy stock at this moment and then, in the future, when the stock price is higher (because of the season of the year) I would sell it.

6. Industry Situation and Company Plans • Aéropostale has done a fabulous job this year. The management team has the right mind-set to ensure success for this company. They have a very positive, bright outlook on business, investment and operation techniques. Their most important goal is to please the customer and to grow as a company every year. • Their future plans are, in a few words, to continue excelling in the fashion industry. This past year, their total net sales increased 19% and earnings per share increased a whopping 28%. Aéro wants to keep supplying its customers with their valued brand of clothing at reasonable prices. They would also like to keep good control over their inventories, and increase their sales even further by branching out. They would like to open up several more stores and spread the love of the Aéropostale brand. (Annual Report and Letter to Stockholders) • “The Company was ranked second in the ‘Best Investor Relations’ category in the Retail/Specialty Stores Sector.” In the area of stocks, their future plans are clear. Because of their immaculate standings right now, their future plans are to maintain this level of prosperity in their investor relations and earnings. They want to continue to provide security and wealth to their shareholders. (Yahoo Finance about Aéropostale)

7. Income Statement • Aéropostale’s format is most like a multi-step income statement. • All numbers are increasing because the company is continuously growing, expanding, and improving its operations and sales.

8. Balance Sheet • Assets increased, liabilities decreased and SHE increased, showing an overall increase in the company’s growth. Liabilities probably decreased because of decreased debt and improved methods of handling liabilities. Stockholder’s Equity increased probably because stockholders saw how well Aéro was doing and more people invested in their stock. • SHE changed the most, with an increase of $157,784.

9. Statement of Cash Flows • Cash flows from operations are more than net income for the past two years. • Yes the company is growing through investing and financing activities. Aéro’s intentions are to expand their business and that is exactly what they are doing. • Proceeds from stock options are the company’s primary source of financing. • Overall, cash has increased but cash flows for operating, investing and financing has also increased so there is not necessarily a larger amount of cash.

10. Accounting Policies • Revenue Recognition: “Sales revenue is recognized at the ‘point of sale’ in our stores, and at the time our e-commerce customers take possession of merchandise.” • Cash: “We include credit card receivables and all short-term investments with an original maturity of three months or less in cash and cash equivalents. ” • Short-term Investments: They didn’t have and short term investments this fiscal year. However, they “sold all of their short-term investments in auction rate debt and preferred stock securities during fiscal 2007. These short-term investments were recorded at fair-value, with any related unrealized gains and losses included as a separate component of stockholders’ equity, net of tax. Also, investment income is included in interest income.” • Inventories: “Merchandise inventory consists of finished goods and is valued utilizing the cost method at the lower of cost or market determined on a weighted average basis.” • Property and Equipment: “Fixtures, equipment and improvements are stated at cost. Depreciation and amortization are provided for by the straight-line method over the following estimated useful lives: • Fixtures and equipment 10 years • Leasehold improvements Lesser of 10 years or lease term • Computer equipment 5 years • Software 3 years”

11. Notes to the financial Statementsthe topics are: • Summary of Significant Accounting Policies • Short-Term Investments • Jimmy’Z Store Concept Closing and Asset Impairment • Other Matters • Fixtures, Equipment and Improvements • Accrued Expenses • Revolving Credit Facility • Earnings Per Share • Stock-Based Compensation • Retirement Benefit Plans • Stock Repurchase Program • Income Taxes • Commitments and Contingencies • Selected Quarterly Financial Data (Unaudited)

12. Financial Analysis-Liquidity Ratios • Working Capital : having a positive, high working capital is great, and from 2008 to 2009, it increased dramatically. • Current Ratio: it is better to have a current ratio over 2. From 2008 to 2009, the ability to pay short- term debts increased, meaning there is more cash on hand. • Receivable turnover: this was better in 2008, meaning that they turned over more receivables than in 2009 and therefore had more money paid to them. • Average days’ sales uncollected: this was better in 2008 as well because it took a shorter amount of time to receive money from customers. This shows that, in 2009, since they have more cash, it was not coming from receivables. • Inventory turnover: this, on the other hand, has increased since 2008 which means the average inventory has been sold more often in 2009. This has produced more revenue in 2009 from inventory than in 2008. • Average days’ inventory on hand: this shows that it takes a Shorter amount of time to sell inventory in 2009 than in 2008.

13. Financial Analysis-Profitability Ratios • Profit margin: This has decreased from 2008 to 2009. This means that the percentage of each sales dollar that goes towards net income is smaller. • Asset turnover: This shows that they were more efficient in making assets produce sales in 2009 compared to 2008. • Return on assets: They earned more on each dollar of assets invested in 2009 than in 2008 meaning that in 2009, they were using their assets more efficiently. • Return on equity: This shows that the amount earned to every dollar stockholders invested is higher in 2008 than in 2009. This means that in 2009, the company was earning less than in 2008.

14. Financial Analysis-Solvency Ratio • Debt to equity: In 2008, this ratio was above 1. This means that there were more liabilities than stockholder’s equity, therefore the creditors own the company. In 2009, it was below 1, meaning that stockholder’s equity is greater than liabilities and therefore, the stockholders own the company.

15. Financial AnalysisMarket Strength Ratios • Price/earnings per share: This shows that in 2009 there was more confidence from the investors than in 2008. • Dividend yield: the company does not pay dividends.