Earnings Preview: Aeropostale

Aeropostale (ARO) is expected to report Q2 earnings after the market close Thursday, August 21, with a conference call scheduled for 4:15 pm ET.

Guidance

Analysts are looking for a profit of 31c on revenue of $375.63M. The consensus range is 36c to 32c for EPS, and revenue of $365.87M to $377.13M, according to First Call. Aeropostale recently reported its July same-store sales increased 13% and total sales for the month increased $24% to $138.8M. Based on July's better-than-expected sales and gross margins, the company believes Q2 EPS will be 30c to 31c.

Analyst Views

Zacks Research forecast a weak consumer into 2009 because macro headwinds -- housing, debt and food and energy prices -- will persist for some time, although the firm previously believed that teen apparel retailers like Aeropostale would be able to work through these conditions because teens are not directly affected by falling house prices, tightening credit standards and higher energy prices. However, Zacks said recent sales trends would indicate otherwise and it appears that parents have cut back on the discretionary spending for their kids.

Additionally, while Brean Murry believes Aeropostale remains one of the top performers in the teen space, year-ago comparisons will soon get more difficult, adding that the company will need to depend more and more on new concepts to drive store growth.

Morgan Keegan says that while there is "nothing wrong fundamentally" with the company, the firm can no longer urge investors to add positions at current levels.

At the same time, given July sales results, Wedbush remains encouraged by strong positive reaction to the company's assortments and value messaging as heading into the key back-to-school selling season. The firm says positive catalysts in the near-term include Aeropostale's improving mix of fashion basics and veneer assortments, strong consumer reception to the company's pricing strategy and ongoing square footage growth.