), a retailer of active and casual clothing and accompaniments for
youths, is slated to report its fourth-quarter 2011 financial
results on March 8, 2012. The current Zacks Consensus Estimate for
the quarter stands at 38 cents per share, representing an estimated
year-over-year decrease of about 60%. Revenue, as per the Zacks
Consensus Estimate, is $809 million.
Aeropostale reported earnings per share of 30 cents, down 55.2%
from the prior-year earnings of 67 cents, but surpassing the Zacks
Consensus Estimate of 27 cents.
Moving on to its top-line result, Aeropostale registered a
decline of 1% in its total sales to $596.5 million, owing to a 9%
decline in comparable store sales. However, the reported revenue
came ahead of the Zacks Consensus Estimate of $589 million.
Increased inventory level took a toll on its margins, as the
company offered heavy discounts to clear its inventory. Despite
these huge discounts, Aeropostale lagged behind its competitor
American Eagle Outfitters Inc
) in terms of sales.
Agreement of Estimate Revisions
Of the 24 analysts covering the stock, none revised estimates in
either direction in the last 30 days. However, for fiscal 2011, one
analyst revised an estimate downward.
Magnitude of Estimate Revisions
Estimates haven't budged for Aeropostale over the last 30 days,
as the risk-reward ratio remained well balanced for the company.
Analysts are of the opinion that the company has right product
mix to lure its target customers, which in turn, will bring in
incremental sales. However, the company's increased markdowns and
contracting merchandise margins offset the positives.
Mixed Earnings Surprise History
With respect to earnings surprises, Aeropostale has topped as
well as missed the Zacks Consensus Estimate over the last four
quarters in the range of negative 2.1% to a positive 33.3%. The
average remained at positive 14.1%, indicating that the company has
surpassed the Zacks Consensus Estimate by the same magnitude in the
trailing four quarters.
The company is trying to reposition itself to drive growth by
focusing on inventory optimization and cost-containment efforts.
Moreover, we believe the company's e-commerce business provides an
enormous scope for growth.
Aeropostale teamed up with FiftyOne, the leading provider of
international e-commerce services to the U.S. retailers, to launch
its global e-commerce site, Aeropostale.com. The move is highly
accretive to the company's online sales as it will enable
Aeropostale to generate additional sales while broadening its
existing customer base throughout the world.
However, we remain on the sidelines as we expect revenue growth
to remain muted in the coming quarters in the absence of any
near-term catalysts. Further, the company's aggressive inventory
offloading stance in order to right-size its inventory coupled with
lower average selling price is likely to hurt profit margins.
Currently, Aeropostale retains a Zacks #3 Rank, which implies a
short-term (1-3 months) Hold rating.
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