Aeropostale Inc (ARO)

ARO 
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Aeropostale, Inc. (ARO)

Q2 2008 Earnings Call Transcript

August 21, 2008 4:15 pm ET

Executives

Kenneth Ohashi – VP, Investor & Media Relations

Julian Geiger – Chairman and CEO

Mindy Meads – President and Chief Merchandising Officer

Michael Cunningham – EVP and CFO

Tom Johnson – EVP and COO

Analysts

Jeffrey Klinefelter – Piper Jaffray & Co.

Christine Chen – Needham & Company

Adrienne Tennant – Friedman, Billings, and Ramsey

Linda Tsai – MKM Partners

Janet Kloppenburg – JJK Research

Marni Shapiro – The Retail Tracker

Lorraine Maikis – Merrill Lynch

Michelle Tan – Goldman Sachs

Dana Telsey – Telsey Advisory Group

Betty Chen – Wedbush Morgan

Howard Tubin – RBC Capital Markets

Jay Sole [ph] – Morgan Stanley

Robin Murchison – SunTrust

Presentation

Operator

Thank you for joining us for the Aeropostale conference call to review second quarter fiscal 2008 financial results. At this time, all parties are in a listen-only mode. Following the management presentation, we will conduct a question-and-answer session. (Operator instructions)

I would like to remind everyone that this conference call is being recorded. And now I would like to introduce Mr. Ken Ohashi, the company's Vice President of Investor and Media Relations. Mr. Ohashi, please go ahead.

Kenneth Ohashi

Thank you all for joining us this afternoon. With me here today are Julian Geiger, our Chairman and Chief Executive Officer, Mindy Meads, our President and Chief Merchandising Officer, Tom Johnson, our Chief Operating Officer and Michael Cunningham, our Chief Financial Officer.

We issued a press release earlier this afternoon announcing our second quarter financial results. A copy of the release can be found on our corporate Web site. Before we begin, I would like to remind you that during this earnings conference call certain statements from participants' questions may contain forward-looking information such as forecasts of future financial performance.

Forward-looking information and statements involve known and unknown risks and uncertainties which may cause our actual results of future periods to differ materially from our forecast results. Those risks are described in our annual report on Form 10-K and our quarterly reports on Form 10-Q, all of which have been filed with the SEC, and are available on our Web site.

We undertake in obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. (inaudible) I refer to those filings.

Before I turn the call over to Julian, I would like to ask everyone to limit themselves to one question during our Q&A session to allow everyone a chance to speak. Once we have gone through a round of questions we will go back and you may queue up again at that time. We now like to turn the call over to Julian.

Julian Geiger

Thanks, Ken. Good afternoon, everyone. Thank you for joining us. All of us at Aeropostale are extremely pleased with our results of the second quarter. We delivered another period of record sales, record operating margins and record earnings.

Let me take you through some of the highlights. Net sales for the quarter increased 21% to $377 million and we generated a same-store sales increase of 11%. We increased gross profit by 230 basis points and our operating margins improved by 220 points. Our net earnings per share grew 63% to $0.31 per share from $0.19 per share last year.

Additionally, we ended the quarter with a strong start to the back to school selling season and we believe that we are well-positioned for the remainder of the year. The strategic initiatives that we've outlined have been implementing over the past few years are having a substantial and positive impact on our business.

These initiatives include offering the customer a balanced merchandise assortment that is fresh and focused, managing the inventory carefully while maximizing efficiencies in product flow by making investments in people, process and systems and creating a fun and exciting shopping environment through our new store model and our innovative marketing programs.

The consistency of our results demonstrate that our initiatives are succeeding. Our balanced merchandise assortment, our exciting store experience, our unique promotional model are resonating with our teen customer. Aeropostale has involved into a powerful destination brand as evidenced by our positive mall traffic and recognition as the leading brand in various market research studies.

We are pleased that yet another generation teen customers has embraced Aeropostale as its store. We believe that our strong positioning and our unique operating model of balancing fashion and value will ensure our success for many years to come.

Now I would like to turn the call over to Mindy who will take you through some of the merchandising highlights from the second quarter.

Mindy Meads

Thank you, Julian. We were very pleased with the customer response to our summer and early back to school assortments as we continue to build on our successes from the first quarter.

Our merchandising successes have been a result of our team's intense focus on one, giving the customer an added assortment, the right colors, patterns and detailing the classifications they want, offering the customer the best value to fund and unique promotions and continuing to listen and stay true to our core customer. This strategy has enabled us to achieve strong and consistent results throughout the quarter.

Let me take you through some of the highlights. Our women's comp were up in the high single digit. Men's was up in mid teens. While we experienced broad-based strength across all categories we saw particular strength in women's and men's graphics. Denim for both genders, women's bare knit tops and men's Polo.

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