Aeropostale Inc. Earnings Cheat Sheet: Margins Suffer for Five Quarters Straight, Profit Drops

Aeropostale Inc. (NYSE:ARO) reported its results for the third quarter. Aeropostale is a mall-based retailer that sells casual apparel and accessories for young adults.

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Aeropostale Earnings Cheat Sheet for the Third Quarter

Results: Net income for Aeropostale Inc. fell to $24.1 million (30 cents per share) vs. $58.5 million (63 cents per share) a year earlier. This is a decline of 58.8% from the year earlier quarter.

Revenue: Fell 1% to $596.5 million from the year earlier quarter.

Actual vs. Wall St. Expectations: ARO beat the mean analyst estimate of 27 cents per share. It beat the average revenue estimate of $576.4 million.

Quoting Management: Thomas P. Johnson, Chief Executive Officer, commented, “We are making incremental progress on our strategic initiatives by bringing more color and fashion to our merchandise assortment, managing our inventories appropriately and controlling our expenses carefully. However, we are not satisfied with our overall performance, and we remain cautious in our outlook. The retail environment remains incredibly promotional with many teen retailers increasing both the depth and breadth of their promotions. Additionally, unemployment remains high and there is continued uncertainty about the overall economic environment. Near-term we are focused on executing our holiday initiatives and long-term we remain committed to improving our financial performance as well as investing in future growth.”

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins as gross margin fell 9.5 percentage points to 27.1% from the year earlier quarter. Over that time, margins have contracted on average 7.7 percentage points per quarter on a year-over-year basis.

The company has now beaten estimates the last two quarters. In the second quarter, it topped expectations with a loss of -2 cents versus a mean estimate of a loss of 3 cents per share.

Net income has dropped 47.1% year over year on average across the last five quarters. Performance was hurt by a 93.3% decline in the second quarter from the year earlier quarter.

Revenue has fallen in the past two quarters. In the second quarter, revenue declined 5.4% to $468.2 million from the year earlier quarter.

Looking Forward: Analysts have a more positive outlook for the company’s next quarter performance. Over the past month, the average estimate for the fourth quarter has gone up from 36 cents per share to 43 cents. For the fiscal year, the average estimate has moved up from 65 cents a share to 87 cents over the last thirty days.

Competitors to Watch: Pacific Sunwear of California, Inc. (NASDAQ:PSUN), Zumiez Inc. (NASDAQ:ZUMZ), Abercrombie & Fitch Co. (NYSE:ANF), American Eagle Outfitters (NYSE:AEO), Express, Inc. (NYSE:EXPR), The Gap Inc. (NYSE:GPS), The Buckle, Inc. (NYSE:BKE), Body Central Acquisition Corp. (NASDAQ:BODY), The Wet Seal, Inc. (NASDAQ:WTSLA), and Casual Male Retail Group, Inc. (NASDAQ:CMRG).

Stock Performance: Shares of ARO were up 5% from the previous close.

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)