SAN FRANCISCO (Reuters) - Aeropostale Inc (ARO.N) unveiled a quarterly earnings forecast that beat analysts' estimates, a rare spot of good news for the struggling sector, and announced the launch of a new kids' chain this summer.
But the teen- and pre-teen apparel retailer's shares, which have climbed nearly 60 percent since January, slipped 1.7 percent after-hours on Thursday. They had jumped 3 percent in regular trading.
Needham & Co analyst Christine Chen said some investors cashed in gains, while others might have been initially wary of Aeropostale's first-quarter outlook, which included charges from the closure of its small "Jimmy 'Z" chain.
Aeropostale, whose stylized "A" graces the T-shirts of many a teenage American boy and girl, has taken market share from rivals at its main chain of some 900 stores as teens and their price-conscious parents gravitate to lower-cost casual fashions in a deepening recession.
Hoping to capitalize on that bargain-hunting, Aeropostale plans to launch a new children's store, P.S. from Aeropostale, in June, with an online launch soon after. The new chain will target kids of ages 7 to 12 and its first stores will open in the New York City area.
Aeropostale said it expects first-quarter earnings per share of 22 cents to 24 cents, including a 3 cent per share charge related to the closure of Jimmy 'Z.
Excluding the Jimmy 'Z costs, Aeropostale anticipates earnings of 25 cents to 27 cents, above the 24 cents per share expected, on average, by Wall Street.
Jimmy 'Z closure costs are expected to crimp second-quarter earnings again by 2 cents per share.
Last month, Aeropostale said it would shutter its 11-store Jimmy 'Z chain to focus on its namesake chain and the upcoming children's brand.
OUTSHINING THE COMPETITION
Net income in Aeropostale's fourth quarter, which included the pivotal holiday season, rose to $68.2 million, or $1.01 per share, from $64.7 million, or 95 cents per share, a year earlier. That was a penny above the $1.00 per share expected, on average, by analysts, according to Reuters Estimates.
Revenue rose 17 percent to $690 million while same-store sales, a key gauge of retail performance, rose 6 percent. Online sales rose 88 percent.
But profit margins suffered from holiday markdowns, falling to 35.3 percent of sales from 37.8 percent a year earlier.
Although teen shoppers and their parents have cut back on visits to the mall and spending on apparel, Aeropostale has managed to post same-store sales gains -- a surprising feat amid mostly horrendous results in the sector.
Aeropostale has managed to outshine rival teen chains in past months. This week, American Eagle Outfitters (AEO.N) posted sharply lower quarterly earnings and a 16-percent slide in same-store sales in the quarter.
The Gap's (GPS.N) chain store saw same-store sales fall 17 percent in the fourth quarter.
Aeropostale said it would spend $55 million in 2009 to open 40 of its main stores and 10 of its new children's stores.
Chen argued P.S. from Aeropostale could be a "home run" for parents.
"The timing could be interesting for them given the environment, since they are a value proposition," Chen said.
"What I think the Street doesn't understand..., it's not just the price point, it's because the product looks awesome," Chen said. "If it was just the price, Old Navy would be doing amazing."
Chief Merchandising Officer Mindy Meads said the company was comfortable with its inventory position -- inventory per square foot fell 17 percent at the end of the fourth quarter -- and said she was pleased with the "positive early reads on the spring merchandise assortment."
"We will buy conservatively, remain nimble in order to maximize both sales and margin," Meads said.
(Reporting by Alexandria Sage; editing by Richard Chang and Carol Bishopric)