Since going public in May, teen apparel chain Aeropostale has been a Wall Street darling. Rated a long-term, strong buy by Merrill Lynch, the retailer announced today that its total revenues increased 50.4% for first quarter 2002 to 85.1 million from 56.6 million. Aeropostale reported earnings of $592,000 for the period compared with a $2-million loss in first quarter 2001.

So what is making this specialty apparel retailer so special? "The company is not a fashion leader, but a fashion follower selling product that has proven itself in the marketplace, but that remains viable and often at the height of its popularity," wrote Mark Friedman, first vice president, Merrill Lynch, in a July 10 report on the retailer. "The look is generally more active, comfortable and modest in comparison to its key competitors. In addition, price points are lower with an average unit sale of about $15."

Aeropostale may have learned from the failures of competitor Gap Inc. — accused by pundits of stepping too far out on the fashion ledge. "Due to its ‘fashion follower’ approach, Aeropostale’s fashion risk is hedged, in our view. Moreover, we believe it offers a somewhat ‘timeless’ fashion that is not faddish," Jeffrey Klinefelter, a US Bancorp Piper Jaffray senior research analyst, wrote in a report this morning.

Once the private in-house young men’s label at Macy’s, Aeropostale is now an independent chain of 278 stores targeting consumers aged 11-20 years. The company aims to grow its store base by more than 80 stores per year in both existing and new markets. "In 2002, we estimate square footage growth of approximately 28%," Friedman wrote. "We believe the opportunity exists for over 900 stores in the U.S."