Aeropostale Reports Strong Q3

Aeropostale Inc.’s (ARO - Snapshot Report) fiscal 2009 third-quarter net income jumped nearly 47% year over year to $62.6 million. Earnings per share came in at 92 cents, edging past the Zacks Consensus Estimate, for the 5th consecutive instance, by a penny. The result was also higher than the company’s upgraded guidance of 90 cents to 91 cents per share announced in early November. 

The specialty retailer for teenagers recorded a solid 17.8% year-over-year growth in sales to $567.8 million driven by a 10% expansion in same-store sales, a metric widely used for judging a retailer’s performance. The growth in sales was also boosted by a 4.5% increase in total square footage as the company added 40 stores across the U.S. and Canada, compared to the year-ago quarter. 

Low-priced teen retailers such as, Aeropostale and Buckle Inc. (BKE - Snapshot Report) have been able to negotiate macroeconomic headwinds successfully by offering value to price conscious customers. On the other hand, more expensive competitors such as, Abercrombie & Fitch Co. (ANF - Analyst Report) continue to witness a slump in same-store sales. 

Aeropostale’s gross margin rose by 330 basis points (bps) to 39.3%, while selling, general and administrative expenses, as a percentage of sales, dipped by 70 bps to 20.6% due to the management’s cost-control measures and efforts to align merchandise assortment in accordance with sales trends. 

Accordingly, the company recorded an impressive 50.2% growth in operating income to $105.7 million during the quarter, while operating margin grew by 400 bps to 18.6%. During the quarter, Aeropostale opened 18 new stores, bringing its total store count to 945 at quarter-end. For fiscal 2010, the company plans to spend approximately $70 million towards the launch of about 50 to 55 new stores, 40 store remodels and certain information technology investments. 

Meanwhile, Aeropostale recorded a solid start to the crucial holiday selling season by posting a 14% year-over-year growth in November sales to $228.0 million driven by a 7% expansion in same-store sales. Accordingly, the company anticipates fiscal 2009 fourth quarter earnings to range between $1.20 and $1.24 per share, compared to $1.01 per share recorded in the year-ago period. 

The guidance is in line with the Zacks Consensus Estimate of $1.23 per share, which has edged up a penny in just the past week as 1 analyst, out of 26 who cover the stock, raised expectation.

Read the full analyst report on ARO

Read the full analyst report on BKE

Read the full analyst report on ANF