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Shares of Aeropostale (ARO) saw some turbulent action during Wednesday's trading session. Shares rose over 6% during the regular trading session, but fell over 7% in after-hours trading.

The company made upbeat comments about sales over the Black Friday weekend, before the market open. Shares fell after the casual apparel retailer issued a disappointing outlook for the fourth quarter, after the close.

Third Quarter Results

Aeropostale reported third quarter revenues of $605.9 million, up 2% on the year. Revenues from the e-commerce business rose 12% to $51.1 million. Comparable sales fell by 1%, which compares to a same store sales decline of 7% last year. Revenues came in ahead of analysts expectations of $601.4 million.

Sales were driven by a 3% increase in the number of units per transaction, and a 2% increase in the number of transactions. Growth was partially offset by a decline in pricing.

Net income rose modestly to $24.9 million, as diluted earnings per share rose by a penny to $0.31 per diluted share.

During the quarter, the company repurchased 3.0 million shares of its own stock, for a total consideration of roughly $40.8 million. Under its current share repurchase authorization, Aeropostale can repurchase another $104.4 million of its own shares.

CEO Thomas P. Johnson commented on the results, "For the third quarter, we achieved net earnings slightly ahead of our previously issued guidance. Although we experienced pressure on our women's core basics business, she responded positively to our fashion offering. In addition, our men's and accessories business performed well."

Outlook

For the current fourth quarter of this year, Aeropostale guides for adjusted earnings per share of $0.36 to $0.41 per share. This compares to earnings of $0.44 per share last year, and excludes the impact of potential store asset impairment charges.

The guidance falls short of analysts expectations of $0.54 per share.

CEO Johnson commented on the important holiday season, "While our performance over the Black Friday weekend was encouraging, the environment during the first few weeks of November was challenging. As a result, we continue to be cautious for the remainder of the quarter given the inconsistency we are seeing in our business against the backdrop of a highly promotional environment."

Valuation

Aeropostale ended its third quarter with $184.5 million in cash and equivalents. The company operates without the assumption of debt, for a comfortable net cash position.

For the first nine months of its fiscal year of 2012, Aeropostale generated revenues of $1.59 billion. The company net earned $35.6 million, or $0.44 per diluted share. Full year revenues could come in around $2.4 billion, with GAAP earnings coming in around $55-$60 million, or roughly $0.70 per diluted share.

Factoring in a 7% fall in after hours trading, the market values Aeropostale at roughly $1.06 billion. Operating assets are valued at roughly $875 million. This values the firm's operating assets at roughly 0.4 times annual revenues and 15-16 times annual earnings.

Aeropostale currently does not pay a dividend.

Some Historical Perspective

Year to date, shares of Aeropostale have lost roughly 15% of their value. Shares started the year around $15 in January and swiftly rose to $23 in April of the year. Shares lost roughly half their value after a severe profit warning, hitting lows of $12 in the beginning of the month November. Shares are currently exchanging hands at $13 per share.

Shares of the company traded at highs of $32 in 2010, and fell back to lows of $10 in 2011. Shares rebounded earlier this year, but have fallen to the low end of the trading range again. Between 2008 and 2012, Aeropostale grew annual revenues from $1.9 billion to an estimated $2.4 billion. The company reported strong earnings in the period 2008-2010, followed by strong earnings declines from 2011 onwards.

Investment Thesis

Aeropostale's shares are trading roughly flat compared to yesterday's close. Shares rose during the regular session after the mall-based retailer, focused on teenagers and kids, made upbeat comments about Black Friday sales.

Shares fell in after hours trading on the back of the company's fourth quarter earnings outlook. Softness in the first week of November, was partially driven by the impact of hurricane Sandy. Investors were disappointed by the lower earnings outlook, after the company made upbeat comments about Black Friday sales, earlier on Wednesday.

Aeropostale is struggling as the teen retail segment still relies on deep promotions, with sources reporting up to 70% discounts of Aeropostale's merchandise during Black Friday.

At the presentation of its second quarter results, I urged investors to wait for a trigger before picking up shares. Today, I reiterate my stance, and I remain on the sidelines given the disappointing outlook for the final quarter.

Source: Aeropostale - Wait For Triggers, Before Picking Up This Value Stock