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Summary

  • Aeropostale pre-announced a positive Q2, and brought back Julian Geiger as CEO.
  • This development has strengthened my bullish conviction on Aeropostale.
  • In my previous article, I discussed how Aeropostale's turnaround strategy would improve profitability in the coming quarters.

On Monday, Aeropostale (NYSE:ARO) pre-announced Q2 results and expects to handily beat consensus estimates. The company announced that net sales decreased to $396.2 million, from $454 million a year ago, but that is slightly above estimates of $395.4 million. The crux of the reason for the positive sentiment in after-hours trading (up nearly 10%), is because the company expects its second quarter operating loss, excluding one time charges, to be between $0.42 to $0.45 per share. That presents a tremendous improvement from previous guidance of a loss of $0.55 to $0.61, and analyst expectations of $0.58 per share in losses.

Moreover, the company also announced that Julian Geiger would retake the role of CEO, after resigning two years ago. Under Mr. Geiger's guidance, ARO underwent a period of significant growth. Mr. Geiger previously rejoined Aeropostale's board in May. Thomas Johnson will be stepping down as CEO, and will leave Aeropostale's board. Mr. Geiger was excited about the prospect of returning:

"The opportunity for sales and profit growth; the ability to reinforce the Company's special culture; and the chance to work closely with, and influence, the management team and the field organization combine to create a compelling and dynamic challenge. It is with enormous excitement that I prepare to lead the Aeropostale team into a future filled with optimism and opportunity."

Source: Press Release

In my previous article, "Aeropostale: Set To Benefit From Sycamore's Expertise and Capital," I outlined the asymmetric risk/reward opportunity that was present in ARO. I delved into the turnaround plan, and discussed how management's plan to focus its stores and close mall locations would benefit its profitability. Further, I opined that margins would expand as ARO struck several partnerships such as with Warner Brothers for the Pretty Little Liars collection, and due to inventory impairments coming to an end. The improvements from the turnaround are beginning to percolate, and with a high short interest and incredibly paltry trading range on a price to sales basis, ARO still provides a great investment opportunity.

Source: Update: Aeropostale Pre-Announces A Positive Quarter