May 23, 2014 / 12:16 AM / 3 years ago

Aeropostale forecasts loss as teens shun its fashion

Customers wait in line at an Aeropostale store in New York August 20, 2009.Brendan McDermid

(Reuters) - Teen apparel retailer Aeropostale Inc ARO.N, struggling to keep pace with changing fashion trends, forecast a bigger-than-expected loss for the current quarter, sending its shares down 18 percent after the bell.

The company also posted its seventh straight quarterly decline in comparable sales after fewer customers visited the malls where its stores are located.

Like other teen apparel retailers, Aeropostale has been losing out to fast-fashion brands such as H&M (HMb.ST), Forever 21 and Inditex's (ITX.MC) Zara, which bring the latest styles from the runway to their stores within weeks.

As shoppers shun its logo-centric clothes in search of trendier alternatives, Aeropostale will focus instead on promoting its new sub-brands, such as Tokyo Darling, in search of higher margins.

"We absolutely don't believe that the Aeropostale brand is the damaged brand," Chief Executive Thomas Johnson said on a post-earnings conference call. "It's really about adding newness."

Aeropostale has lost nearly three quarters of its market value in the last 12 months.

The company said on Thursday that it expected a loss of 55-61 cents per share in the current quarter, more than the 50-cent average loss forecast by analysts, according to Thomson Reuters I/B/E/S.

Aeropostale's comparable sales, including online sales, fell 13 percent in its first quarter ended May 3, compared with a 9.7 percent decline expected by analysts polled by Consensus Metrix.

Other apparel retailers have also suffered. Gap Inc (GPS.N) said on Thursday that its comparable-store sales fell 1 percent and profit plunged 22 percent in the first quarter, hurt by weak demand for its Gap and Banana Republic brands.

Also this week, Urban Outfitters Inc (URBN.O) reported a lower-than-expected quarterly profit while American Eagle Outfitters Inc (AEO.N) and TJX Cos Inc (TJX.N) gave disappointing outlooks.

"Teen unemployment is still high and these customers are spending on apparel very selectively," said SunTrust Robinson Humphrey Capital Markets analyst Pamela Quintiliano.

Aeropostale's first-quarter net loss widened to $76.8 million, or 98 cents per share, from $12.2 million, or 16 cents per share, a year earlier.

Excluding items, the retailer posted a loss of 52 cents per share. Analysts expected a loss of 72 cents per share.

The company said it shut down 18 Aeropostale stores during the quarter. Last month, the company said it planned to cut about 100 jobs and shut 125 of its mall-based P.S. from Aeropostale stores in 2014.

Aeropostale's shares fell as low as $3.70 in extended trading after closing at $4.52 on the New York Stock Exchange.

Editing by Sriraj Kalluvila and Robin Paxton

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