Earnings Cheat Sheet: Aeropostale (ARO) Slides On Weak Guidance And C-Level Shakeup

Aeropostale Inc. (NYSE: ARO) is a mall-based specialty retailer of casual apparel and accessories.  The Company designs, markets and sells its own brand of merchandise principally targeting 14 to 17 year-old young men and women.  ARO sports a $2.1 billion market cap and has beaten estimates in ten of the past twelve quarters.

Earnings: 3Q profit excluding non-recurring items of $58.5 million ($0.67/share) vs. 3Q09 profit of $62.6 million ($0.61/share).  There are 9% fewer shares outstanding now vs. 3Q09.

Revenue: Up 6.2% to $602.8 million.

Actual vs. Wall St. Expectations: ARO beat the street in terms of EPS by a slim margin, as analysts expected the company to report a profit of $0.66/share.

Notable Stats: 4Q guidance failed to meet expectations as management announced EPS guidance of $0.94-$0.96.  Analysts had forecasted 4Q EPS of $1.03.

Same-store sales declined 1% in November vs. expectations of 0.9% growth.

Sales from ARO’s e-commerce business popped 17% to $38.3 million.

Gross margin fell to 36.6% from 39.3%.

Did You Hear That? CEO Thomas P. Johnson stated that, “we are very pleased to deliver third quarter earnings at the high-end of our initial guidance. Our ability to navigate effectively through the challenging and promotional environment truly underscores the power and flexibility of our promotional specialty store model.”

Aeropostale announced that co-Chief Executive Mindy C. Meads would depart the company “to pursue other interests,” allowing Thomas P. Johnson to assume full responsibility for that role.

Technicals: ARO had gained as much as 46% on the year before taking a dive in September.  Shares broke downward below their 10- and 40-week moving averages but were able to re-take the marks in the weeks leading up to the company’s quarterly report.  However, following what was considered a weak report, shares again pierced the aforementioned moving averages, selling off on greater volume than shares had seen in months.  Now, shares seem headed to support in the range outlined below.  If you’re interested in the company, look for stabilization in that range before considering any accumulation.

Commentary: Aeropostale enjoyed relative success during the recession as it outperformed higher-priced competitors like Abercrombie & Fitch (NYSE: ANF) and American Eagle (NYSE: AEO).  Now, it seems that the tides are beginning to turn.  Weak guidance reads through to essentially flat EPS growth from 2011 to 2012 and just a moderate bump in 2013.  While it’s hard to justify any kind of multiple on flat growth, those excited by bottom-picking may have an opportunity in ARO if recent selling continues in the coming weeks.

Disclosure: No holdings in ARO.