Aeropostale Turns it Around with Q4 Earnings; Outlook Bleak - Analyst Blog
After posting losses in each of the first three quarters of fiscal 2014, Aeropostale, Inc. ARO concluded the final quarter with surprise earnings. This Zacks Rank #2 (Buy) stock delivered adjusted earnings of 1 cent per share that comfortably beat the Zacks Consensus Estimate of a loss of 3 cents and compared favorably with a loss of 35 cents reported in the year-ago period. The fourth quarter benefited from strong margins, fall in cost of sales and lower selling, general and administrative expenses that offset the soft top-line performance.
Aeropostale Inc. - Earnings Surprise | FindTheCompany
Including one-time items, the company’s net loss came in at 17 cents per share as against a loss of 90 cents reported in the year-ago quarter.
Despite healthy bottom-line results, shares of this mall-based specialty retailer of casual apparel nosedived 9.5% during after-market trading hours yesterday, as Aeropostale provided a bleak outlook for first-quarter fiscal 2015, citing tough retail trends due to weak consumer demand.
Management now envisions first-quarter net loss in the band of 53–61 cents a share. The current Zacks Consensus Estimate for the quarter is pegged at a loss of 36 cents a share, which may witness downward revisions.
Aeropostale stated that net sales for the reported quarter plunged 11% to $593.8 million, while comparable-store sales, including the e-commerce channel, declined 9% year over year. Net sales also fell short of the Zacks Consensus Estimate of $594.6 million.
Weak traffic, along with competition from other teen retailers, continues to mar Aeropostale’s performance. The company, under its CEO Julian R. Geiger, continues to undertake initiatives to transform and grow its brand. With sustained implementation of operational, marketing and merchandising strategies, coupled with its cost-curtailment program, Aeropostale hopes to turn around its performance.
Gross profit surged 54.8% to $134.5 million, whereas gross margin expanded 970 basis points to 22.7% in the quarter.
Store Count
During the quarter, the company did not open Aeropostale or P.S. from Aeropostale stores but shuttered 77 Aeropostale and 115 P.S. from Aeropostale stores.
In fiscal 2015, management expects to open approximately 1 Aeropostale outlet and remodel approximately 13 Aeropostale stores, either partially or fully. The company also plans to close approximately 50–75 Aeropostale stores and 1 P.S. store.
Other Financial Aspects
Aeropostale ended the quarter with $151.8 million of cash and cash equivalents, long-term debt of $138.5 million, and shareholders’ equity of $93.6 million. Moreover, during the quarter, the company incurred $2.7 million of capital expenditures. Management projects capital expenditures of about $16 million during fiscal 2015.
Other Stocks to Consider
Other favorably ranked stocks in the retail industry include American Eagle Outfitters, Inc. AEO, Zumiez, Inc. ZUMZ and Urban Outfitters Inc. URBN. All these stocks carry a Zacks Rank #2.
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