Seeking Alpha
Growth, long/short equity, dividend investing, oil & gas
Profile| Send Message|
( followers)

Aeropostale (NYSE:ARO) will report earnings Wednesday November 30, 2011 after the closing bell. Retail clothing sales are a competitive market to do business in. Specialization within this industry, while benefiting short term, can destroy a company in the long run. Aeropostale battles for the young adult clothing category with two other main competitors, Abercrombie & Fitch (NYSE:ANF) and American Eagle Outfitters (NYSE:AEO).

American Eagle Outfitters reported earnings Wednesday morning before the bell on Wall Street. A company statement reported strong sales over the Thanksgiving weekend were driven by increased traffic and conversion. American Eagle Outfitters expects sales momentum to continue, especially during the peak holiday shopping season. With AEO beating consensus estimates Wednesday morning, investors will be looking for the same from ARO.

Aeropostale currently has gross margins of 32.34%. This is less than 70% of other companies in this industry sector. The 6.79% profit margin is a reflection of the low gross margins in the industry overall. When compared to American Eagle Outfitters and Abercrombie and Fitch with profit margins at 5.7% and 5.02 percent, Aeropostale does show an advantage here. This will allow the company to focus money toward the business operations if needed. The company does a good job controlling costs and expenses when compared to the industry peers.

Q3 earnings expected to be announced after market hours has estimates that average $0.28 per share. Estimates looking out to Q4 of 2011 are $0.44 per share. Analysts have seen a $0.01 beat on estimates in the previous Q3’s.

Aeropostale’s stock is currently rated a hold running into the holiday season. ARO has underperformed the S&P 500 -42.99 percent on the year. Heading into the market close a little of an hour away, ARO is trading at $15.46 +$0.72 (4.88%).

Options markets for DEC11 point to stock range expected to trade above $15 per share and below $17. Options traders are likely expecting a beat today will go unnoticed with overall market runup during trading today and selling the calls as an income strategy on their holdings.

Aeropostale announced November 23, 2011 the addition of Arthur Rubinfeld to its board of directors. Mr. Rubinfield was twice part of operations at Starbucks Coffee Company (NASDAQ:SBUX).

About Aéropostale, Inc. (Published from the company)

Aéropostale, Inc. is a 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 7 to 12 year-old kids through its P.S. from Aéropostale® stores. The Company provides customers with a focused selection of high-quality, active-oriented, trend-right merchandise at compelling values. The Company currently operates more than 970 Aéropostale® stores across the United States, Puerto Rico, and Canada, more than 50 P.S. from Aéropostale® stores in the United States and, pursuant to a licensing agreement, 10 Aéropostale® stores in the United Arab Emirates.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Disclosure: Unless listed following this disclosure, DavidsCreek, LLC or Jerry R. Carter, does not have a financial interest in any equities, equity options, futures, or futures options recommended or described herein. All employees and agents will not initiate positions until 24 hours after publication before acting on recommendations. Copyright 2011 all rights reserved. All data and statements are reasonably believed to be reliable and accurate; however DavidsCreek, LLC or Jerry R. Carter, does not guarantee its accuracy or completeness. Opinions expressed are subject to change without notice. There is a risk of loss trading equities, equities options, futures and futures options. Past performance is not a guarantee of future results.

Source: Aeropostale To 'Air Mail' Q3 Pre-Holiday Earnings