Lower sales coupled with increased input costs dragged down the fourth-quarter 2011 results of Aeropostale Inc. (ARO).
The company reported earnings per share of 44 cents, down 53.7% from the prior-year earnings of 95 cents. However, the reported earnings fared better than the Zacks Consensus Estimate of 38 cents.
However, including one time items, the company registered a year-over-year decline of 66.3% to 32 cents a share.
Quarter in Detail
Moving on to its top-line result, Aeropostale registered a decline of 4% in its total sales to $808.4 million, owing to a 9% decline in comparable store sales. However, the reported revenue came ahead of the Zacks Consensus Estimate of $806 million.
Aeropostale lagged behind its competitor American Eagle Outfitters Inc. (AEO) in terms of sales as the company registered a 14% increase in its top line with 10% jump in its comparable store sales.
Amid the gloom, e-commerce business emerged as a ray of hope for the company. Net sales at the e-commerce business marked an increase of 8% year over year to $83.2 million during the quarter under review.
The company’s online sales enable it to generate additional sales while broadening its existing customer base throughout the world. It also boosted the visibility and reputation of Aeropostale as a global firm.
An increase of 13.1% in cost of sales weighed heavily upon the company’s gross profit results. Gross profit plunged 34.2% year over year to $196.1 million. Adjusted gross margin contracted 940 basis points to 26.1% during the quarter, reflecting lower merchandise margins and the deleveraging of occupancy and depreciation costs.
Stores Update
During the quarter, the company opened one Aeropostale and two P.S. from Aeropostale stores. The company closed one temporary P.S. pop-up store. Aeropostale currently operates 915 Aeropostale stores in 50 states and Puerto Rico and 68 Aeropostale stores in Canada. Aeropostale operates 71 P.S. from Aeropostale stores in 20 states.
Further, the company expects to open 18 Aeropostale stores, 30 P.S. from Aeropostale stores, remodel 5 stores, while closing 10 Aeropostale stores in fiscal 2012.
Other Financial Details
Aeropostale ended the quarter with cash and cash equivalents of $223.7 million with no debt and shareholders equity of $409.4 million. The company repurchased $100.1 million shares in fiscal 2011.
Guidance Update
Following the sluggish results, the company forecasts conservative earnings for the first quarter of 2012. Aeropostale expects earnings in the range of 8 cents to 10 cents a share, which is well below the earnings of 20 cents registered in the first quarter of 2011.
Currently, Aeropostale holds a Zacks #3 Rank, which implies a short-term Hold rating.
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