Vernon Gair Module 1

1. Vernon Gair Module 1

2. Overview • Module 1 Summary • Aéropostale SWOT Analysis • Industry Analysis Using Porter’s Five Forces

3. Module 1: The Link between Valuation and Financial Statement Analysis • Course/Text Overview • Why Valuation • Understanding the Business and Business Environment

4. Apparel Stores Industry Analysis • Industry Competition • Highly competitive in both the Children’s and Teen’s markets • Moderate concentration in Apparel Stores industry • Aéropostale has limited market share • Difficult to maintain competitive advantage • Importance of marketing & brand image

5. Apparel Stores Industry Analysis • Threats of Entry • Moderate level of barriers to entry • High capital requirements • Mature industry with established supplier and distribution relationships • Cost of building brand image • Low switching costs

6. Apparel Stores Industry Analysis • Product Substitutes • While the products themselves are necessities, the channels are not • Increase competition from department stores, big box stores, and e-commerce • Decreasing mall traffic makes other options more convenient

7. Apparel Stores Industry Analysis • Buyer Power • High competition level creates price sensitive consumers • Little negotiating power by consumers due to low volume of purchases by a given individual

8. Apparel Stores Industry Analysis • Supplier Power • Limited power of suppliers • Low technology products • Volume of orders • Competition in apparel manufacturing leads to price sensitivity

9. Industry Trends and Outlook • Set to recover as economy and consumer confidence improves • 2.2% 5 Year Annual Industry Growth Estimate • Price over brand shift occurred during the recession

10. Aéropostale SWOT Analysis • Aéropostale, Inc. is a primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aéropostale stores and 4 to 12 year-old kids through its P.S. from Aéropostale stores.

11. Aéropostale’s Strengths • Bargaining power over suppliers • Efficiency of brick-and-mortar stores

12. Aéropostale’s Weaknesses • Number 1 on teen survey of “brands females no longer wear” • Number 2 for males

13. Aéropostale’s Opportunities • Add Additional PS Aéropostale stores as children’s clothing has a higher expected growth • Increased value of price over quality

14. Aéropostale’s Threats • Changing consumer preferences • Market and external competition

15. References • http://www.cnbc.com/id/100774191 • http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1068 • http://clients1.ibisworld.com/reports/us/industry/default.aspx?entid=1069