Saddled with macroeconomic headwinds,
) began fiscal 2014 on a weaker note, recording an adjusted net
loss of 52 cents a share that is wider than the adjusted loss of 16
cents in first-quarter fiscal 2013. However, the adjusted loss was
narrower than the Zacks Consensus Estimate of a loss of 72 cents.
Including one-time items, the company's net loss came in at 98
cents per share compared with a loss of 16 cents lasting the
Aeropostale's net sales plunged 12% to $395.9 million, with
comparable-store sales (comps) declining 13% year over year versus
a 14% fall last year. Net sales also came below the Zacks Consensus
Estimate of $410.0 million. Sales disappointed mainly due to soft
traffic and erratic weather.
Comps included e-commerce sales, which on a stand-alone basis
slumped 18% to $34.3 million during the reported quarter. The fall
in comps is attributable to decrease in transactions, partly offset
by a rise in average unit retail.
Aeropostale's adjusted gross margin shriveled 390 basis points
(bps) to 18.5%, owing to deleveraging of occupancy and other costs
on sales coupled with poor merchandise margins.
Also, selling, general and administrative (SG&A) expenses, as a
percentage of sales, expanded by 320 bps. However, it came above
the company's expectations on account of lower corporate,
transaction and store line payroll costs.
During the quarter, the company shuttered 18 Aeropostale stores and
1 P.S. store, taking their respective store counts to 931 and 150.
During fiscal 2014, this Zacks Rank #3 (Hold) company intends to
open 7 Aeropostale stores, 1 P.S. store and renovate nearly 10
This specialty retailer of casual apparel and accessories ended the
quarter with $24.5 million of cash and cash equivalents, $8.5
million as short-term borrowings and shareholders' equity standing
at $206.8 million.
Moreover, during the quarter, the company spent $8.0 million as
planned capital expenditure. Going forward, the company anticipates
spending nearly $22 million as capex during fiscal 2014.
Though management expects the promotional environment to linger
during the second quarter, it considers itself well positioned to
face competition from peers like
American Apparel, Inc.
). The company's inventories are under control and on track to
achieve cost savings, given its efficient expense management.
Given these factors, Aeropostale initiated its guidance for the
second quarter, wherein it envisions operating losses to range from
$49.0 to $54.0 million. Net loss per share is forecast in the band
of 55-61 cents, assuming flat SG&A and negative comps. The
outlook excludes any effects of the company's deal with Sycamore
Partners and its affiliates.
The current Zacks Consensus Estimate for the second quarter is
pegged at a loss of 48 cents a share, which is susceptible to a
Going forward, the company plans to remain focused on undertaking
initiatives to transform and grow its brand. With sustained
implementation of operational, marketing and merchandising
strategies, coupled with its cost-curtailment program, Aeropostale
is likely to improve in the long term.
Other Stocks to Consider
Other better-ranked stocks in the same industry include
Citi Trends, Inc.
), with a Zacks Rank #1 (Strong Buy) and
Foot Locker, Inc.
) with a Zacks Rank #2 (Buy).
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