Aeropostale sounds warning on back-to-school

NEW YORK (AP) -- Aeropostale Inc. on Thursday expects a deeper loss for the quarter that just ended because it had to mark down more clothing amid weak demand.

Like other teen retailers, Aeropostale has been struggling for some time with tough competition and fickle young shoppers. CEO Thomas Johnson said Thursday that the teen clothing retailer had to discount more due to slower traffic and a "challenging retail environment," particularly in July — a key month in the back-to-school shopping season.

Shares fell 27 cents, or 1.9 percent, to $13.87 in morning trading. The stock is still up about 6 percent this year.

For the fiscal second quarter ended Aug. 4, sales fell 6 percent to $454 million. Analysts expected $460 million, according to FactSet. Revenue from stores open at least one year and online fell 15 percent. That was an ominous sign for the back-to-school season, which began in July and is critical for teen retailers.

Back-to-school is the second-biggest shopping period of the year after the holiday season and so far it is off to a rocky start for teen retailers.

On Tuesday, Aeropostale's rival American Eagle Outfitters Inc. slashed its second-quarter earnings outlook because of weak sales during the April-to-June quarter. In a note to investors, Stifel Nicolaus analyst Richard Jaffe said that while Aeropostale's merchandise misses were "self-inflicted," the discount-driven atmosphere at the mall might hurt Abercrombie's results as well.

The New York company now expects a loss of 42 cents to 44 cents per share, down from a prior forecast of a loss of 15 cents to 20 cents per share. Analysts expect a loss of 17 cents per share, according to FactSet.

However, Thursday's prediction includes charges adding up to 19 cents per share that weren't included in the previous outlook.

The company will report full results for the second quarter on Aug. 22. Rival Abercrombie & Fitch Inc. is also expected to report results that day.

Aeropostale's weak traffic and merchandise missteps led to the quarter's weaker-than-expected sales, said Jaffe — problems that have been going on for the past two years.

Aeropostale has been trying to correct these issues. The retailer has been updating merchandise and developing a new model for its stores.

"As we reposition the Aeropostale brand, we believe our current merchandise assortment is more fashionable and relevant," Johnson said.

Aeropostale's merchandise has gotten more attractive, Jaffe said, but it will take time for customers to recognize the improvement. He kept his "Hold" rating on the stock.