Aéropostale Q3 Loss Worse Than Expected, Q4 Loss Expected

In Industry News, Reports, What's New by Jeff PrineLeave a Comment

AeropostaleNew York—While Aéropostale had already warned that its third quarter report would be disappointing, the teen retailer reported Wednesday afternoon a deeper-than-feared loss and forecast a loss in its holiday quarter, too.

For the quarter ended Nov. 3, Aéropostale posted a loss of $25.6 million, or 33 cents a share, compared with a profit of $25 million, or 31 cents a share, a year earlier. Excluding one-time items, it lost 29 cents a share, missing analysts’ estimate for a loss of 24 cents.

Net sales dropped 15% to $514.6 million, missing the analysts’ estimate for $520.2 million in sales. Comparable store sales–which include the e-commerce– declined 15%, reflecting a decline of 10% in transactions and 7% in average unit retail, partly offset by 2% increase in units per transaction. Online revenues remained flat year over year.

‘Inconsistent Mall Traffic’

“We were more promotional than anticipated in order to strengthen our inventory position going into the fourth quarter,” CEO Thomas Johnson said, calling the teen retail environment “challenging.”

Gross profit declined 48.0% to $87.9 million while gross margin sunk to 17.1%, compared with 27.9% reported in third quarter last year. Excluding one-time items, gross margin contracted 980 basis points to 18.1%, reflecting lower merchandise margins and deleveraging of non-merchandise costs.

Going forward, Johnson said,” While we were encouraged with an improvement in trends over the critical Black Friday holiday weekend, versus our third quarter run rate, we believe it is prudent to be cautious with our outlook for the remainder of the holiday period given heightened promotional levels and inconsistent mall traffic trends. As you know, the entire organization is working diligently and with a sense of urgency on transforming our brand and our business.”

Hence the company forecast a fourth quarter loss between 24 to 32 cents a share, well below the 8 cent a share loss analysts’ forecast.

Aéropostale’s shareholders are undoubtedly looking close what transpired with fourth quarter. Last month, one of its shareholders, Crescendo Partners, called for the sales of the company. Its board responded by instituting a poison pill tactic to warn off an unwanted takeover attempt.





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