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Aeropostale shares fall on 1Q loss, weak forecast

NEW YORK (AP) -- Shares of Aeropostale Inc. fell on Friday, a day after the teen apparel retailer reported a first-quarter loss and offered second-quarter guidance that disappointed investors.

THE SPARK: Aeropostale Inc. reported a loss of $12.2 million, or 16 cents per share, during the quarter. That was a penny smaller than analysts expected. Revenue fell 9 percent to $452.3 million but beat analyst expectations. Revenue in stores open at least one year dropped 14 percent as the company marked down clothing clear stores shelves. The company said cool weather and a weak economy weighed on shoppers.

THE BIG PICTURE: Aeropostale has been struggling for some time with tough competition and fickle young shoppers. The company had clothing left over that didn't sell in the holiday shopping season, and it's been contending with sluggish economic conditions. In March CEO Thomas Johnson said that the retailer was making progress by updating merchandise and developing a new model for its stores. The key test will be the upcoming back-to-school selling season, a crucial time for teen retailers.

THE ANALYSIS: Increased discounting around the mall and weak mall traffic have made Aeropostale's focus on low prices less compelling, said Cowen & Co. analyst John Kernan. It's unlikely that the company's margins — the amount of each dollar in revenue a company actually keeps — will improve in the second half, he added. He kept his "Neutral" rating on the stock.

Susquehanna Financial Group analyst Thomas Filandro was more positive, saying there are some signs that a turnaround may be in the works. He said management is "keenly focused" on turning around the core Aeropostale brand while at the same time investing in other business such as its P.S. brand, international expansion, opening franchises and e-commerce. He kept his "Positive" rating on the stock and raised his price target by $1 to $19.

SHARE ACTION: Shares have risen 27 percent since the beginning of the year, but fell $1.55, or 9.4 percent to $14.93 in afternoon trading. The stock traded between $11.76 and $20.99 over the past 52 weeks.