Aeropostale beats Street, but outlook disappoints
SAN FRANCISCO (Reuters) - Aeropostale Inc (ARO.N) posted an 18 percent rise in net income on Wednesday, beating Wall Street's forecast by a penny, but the teen retailer gave a disappointing outlook for the holiday quarter and its shares fell.
Aeropostale, which sells colorful T-shirts, shorts, jeans and other casual looks to young teens, has been a bright spot in an otherwise struggling teen retail sector in recent months, as shoppers bypass higher-priced rivals for Aeropostale's many promotions on casual apparel.
Its shares fell 2.6 percent after hours, giving up some of the gains made during normal trading, when shares rose nearly 7 percent.
But the shares of rival Hot Topic Inc (HOTT.O) increased 4 percent after the rock 'n roll-inspired retailer posted a 6.5 percent rise in same-store sales due to a strong Black Friday shopping weekend.
Aeropostale posted third-quarter net profit of $42.6 million, or 63 cents per share, compared with $36 million, or 48 cents per share, a year earlier.
Analysts, on average, were expecting earnings of 62 cents, according to Reuters Estimates.
Sales rose 17 percent in the quarter, while same-store sales, a key measure of retail performance, increased 7 percent.
The results were also helped by slightly higher gross profit margins, which rose to 36 percent of total sales from 34.9 percent a year earlier.
"We feel at this point with the 14- to 17-year-old customer, we're the brand of choice," said Chief Executive Julian Geiger, who added that Aeropostale stores were "maxed out" with shoppers on Black Friday, the kick off to the holiday season on the day after Thanksgiving.
Apparel retailers have been struggling for months as shoppers cut back on purchases amid a worsening economic environment and recessionary fears.
While Aeropostale's business model is built around a constant stream of promotions, rivals from Abercrombie & Fitch Co (ANF.N) and American Eagle Outfitters Inc (AEO.N) have been forced to markdown merchandise to lure cash-strapped customers.
Hot Topic, whose sales were struggling even before the U.S. economy went sour, said better-than-expected sales in November meant that fourth-quarter earnings were now expected to be at the higher end of a previously-announced range of 25 cents to 28 cents per share.
Same-store sales rose 6.5 percent, helped by gains at both its chains, Hot Topic and Torrid. Analysts polled by Thomson Reuters Estimates had been expecting a decline of 0.1 percent, on average.
"DIFFICULTY OF FORECASTING"
Looking ahead to the fourth quarter, Aeropostale said it expects earnings to range between 84 cents to 90 cents per share, below the 98 cents expected, on average, by Wall Street. Continued...
