Aeropostale’s Stock Value Drops 40% After Poor Q2 Report

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

Deconstructing the Aeropostale Look for Fall: The retailer introduced its “This is Aero” blog this month

Deconstructing the Aeropostale Look for Fall: The retailer introduced its “This is Aero” blog this month

New York—Analysts indicated today that the fall in Aeropostale’s stock price—some 40% since the beginning of August—has hit bottom following the teen retailer’s poor second quarter report released Friday.

For the quarter ended August 3, Aeropostale posted a net loss of $33.7 million, or 43 cents a share, compared with a profit of $71 million, or break-even per share, a year ago. Excluding charges for writing down its stores’ value and other one-time items, adjusted loss was 34 cents a share. Analysts’ average estimate expected a loss of 29 cents a share.

Net sales fell 6% to $454 million compared with analysts’ estimate for $455 million in sales. Comparable store sales fell 15% reflecting a 10% decline in transactions and a 5% decline in average unit retail. Units per transaction rose 1%. Online sales dropped 15%.

‘Highly Promotional’ Teen Retail to Continue

Earlier this month, Aeropostale warned that its second quarter didn’t look good and that it would cut its outlook as it had to increase markdowns amid weak demand.

“As previously reported, our second-quarter results did not change materially from earlier in the year,” said CEO Thomas Johnson. “Our business was pressured by a challenging teen retail environment with weak traffic trends and high levels of promotional activity. Our results were particularly disappointing given the level of change we have registered with the Aeropostale brand in recent periods.”

For its third quarter, Aeropostale expects to report a loss of 21 to 26 cents a share, compared to earnings of 31 cents a share last year. The company expects comparable store sales to be weaker than the second quarter, too. Moreover, the company wouldn’t provide any forecasts beyond third quarter as it grasps to turn around business.

“Our negative outlook for the third quarter reflects the challenges of a highly promotional and competitive teen retail environment which we expect will continue,” Johnson said.

Aeropostale also plans to close 30 to 40 doors during its fiscal 2013, an increase from its previous estimate for closing 15 to 20 stores.

“As we navigate the current environment, we will continue to focus on our strategic initiatives of further refining our merchandise mix and communicating the changes we have made to our brand through marketing,” said Johnson, echoing the sentiments that its rivals Abercrombie & Fitch and American Eagle Outfitters stated in their recent reports.

“We are committed to turning our business around and remain focused on shifting brand perception and recapturing market share.”




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