Aeropostale Reports Higher Earnings But Lowers Outlook

Teen retailer Aeropostale reported sharply higher earnings, but said that it expects third quarter earnings to come in below analyst’s current expectations. The company’s second quarter net earnings of $14.7 million ($0.19/share) were a significant increase over last year’s $8.42 million ($0.10/share). Sales increased as well, rising to $311.2 million from $274.6 million. Same store sales dropped 4.1%. Analysts polled by Thomson Financial expected $0.18/share on $313 million in sales. Julian R. Geiger, Chairman and CEO, commented: “During the quarter we were able to generate strong increases in our gross margin and, as a result, deliver record second quarter earnings, which were at the high end of our previously issued guidance.” However, the company announced it expects third quarter earnings of $0.43 to $0.45 cents/share; analysts had been looking for $0.47 cents/share. Earlier this month, the company admitted that the pullback in consumer spending during back-to-school season would hurt sales. In a post-earnings note, Citigroup analysts wrote, "Although we are positive on the earlier BTS collection (shorts, printed tanks & babydoll ts), we are less constructive on the athletic, preppy styles (rugby shirts, athletic graphics), which we see downtrending on the teen market, as well as guy's wide leg denim, and girl's heavy/chunky sweaters. Dresses represent a missed opportunity in our view." Citigroup said it's cautions on H2 EPS "given our less favorable view of the Fall assortment, increasingly difficult comparisons over the next 4 quarters & uncertainty around the macroeconomic environment." Aeropostale traded down 2.7% in after-hours trading to $22.50.

Sources: Press Release, MarketWatch, Reuters
Commentary: Aeropostale's Sales Definitely Slowing • Select Retail Sales Slow in May: Sign of a Wider Consumer Slowdown? • July Same-Store Sales Roundup
Stocks/ETFs to watch: ARO. Competitors: AEO, GPS. ETFs: RXI, PBJ, RTH

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