Aeropostale Posts “Disappointing” Q4 Loss, Forecasts Q1 Loss Too

Aeropostale, which has emphasized basics and graphics T-shirts  for younger teens, has been working to integrate more fashion into its product mix. The company on Thursday said its reducing the core basics penetration by about 22% over the next two quarters and investing into fashion basics and fashion merchandise.

Aeropostale, which has emphasized basics and graphics T-shirts for younger teens, has been working to integrate more fashion into its product mix.
The company on Thursday said its reducing the core basics penetration by about 22% over the next two quarters and investing into fashion basics and fashion merchandise.

New York—Aeropostale Inc. reported Thursday what it called “disappointing results:” the teen retailer swung into a fourth quarter loss and predicted a first quarter loss, sending its shares down in early trading.

For the quarter ended Feb. 2, Aeropostale posted a loss of $671,000, or 1 penny a share, compared to a profit of $26.1 million, or 32 cents a share, a year ago. The net loss was driven by store asset impairment charges of $19.7 million, or 25 cents a share. Excluding asset impairment charges, adjusted per-share earnings slipped to 24 cents from 44 cents. The company in January cut its earnings guidance to a range of 20 cents to 24 cents and analysts’ estimate expected 22 cents a share.

Net sales for the quarter edged down 1% to $797.7 million, ahead of analysts’ estimate for $775.7 million. However, comparable sales fell 8% in the quarter, compared with a 7% decline in the year-ago period. E-commerce sales jumped 16% year-over-year. But excluding online sale, comparable store sales were down 9%.

Gross margin narrowed to 19.8% from 24.3% a year ago.

‘Increased Promotional Activity’ in First Quarter

Thomas Johnson, chief executive, called the results were “disappointing,” but noted progress on “strategic initiatives,” including adding new talent and developing a next-generation store model.

“While we have not reached the level and consistency in our performance for which we strive, we are committed to evolving and transforming our product to position ourselves as a true lifestyle brand,” Johnson said.

While sales have improved over the past three quarters and the company said it had a strong Black Friday weekend, sales and traffic have declined since December.

Because of “the sales shortfall in the fourth-quarter versus plan, we are planning increased promotional activity compared to the first quarter last year to clear through inventories,” said Marc Miller, chief financial officer in a conference call with analysts. “As a result, we expect pressure on both the sales and gross margin line.”

Looking ahead, Aeropostale projected a first quarter loss of 15 cents to 20 cents a share, compared with earnings of 13 cents a share a year earlier. Meanwhile, analysts’ estimates forecast a profit of 8 cents a share.

“We anticipate a challenging first quarter as a result of expected margin pressures from holiday carryover inventory, and the impact of a weak macroeconomic environment,” Johnson said.

Aeropostale said it plans to open about 14 Aeropostale stores and 60 of its children’s stores, P.S. from Aeropostale, in 2013, and have identified up to 100 locations to shutter over the next several years.

 

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Jeff Prine

Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com