Aeropostale, Inc. ARO reached a new 52-week low of $1.65 yesterday. Investors appear to be losing confidence in the company after this specialty retailer of casual apparel and accessories posted soft first-quarter fiscal 2015 results and provided a bleak outlook for the second quarter. The company’s shares have dropped 35.5% since the earnings announcement on May 21, while the stock has plunged 30.1% year to date.
In the first quarter, this New York-based company’s adjusted loss of 56 cents per share fared unfavorably with the Zacks Consensus Estimate and was wider than the prior-year quarter loss of 52 cents per share. Net sales plunged 20% to $318.6 million, with comparable-store sales (comps), including the e-commerce channel, declining 11% year over year.
Aeropostale’s performance was mainly impacted by West Coast port unrest, unfavorable weather conditions and stiff competition. Management now estimates net loss in the band of 52–60 cents a share for second-quarter fiscal 2015. Moreover, the company hinted that comps in the second quarter might decline in the low-to-mid single digits.
Moreover, the estimates for Aeropostale have been on a downtrend since the company reported first-quarter results and provided a subdued guidance. It seems that analysts have become less constructive on the stock's future performance. This is evident from the Zacks Consensus Estimate for fiscal 2015 that tumbled to a loss of $1.34 from a loss of $1.11 in the past 60 days. For fiscal 2016, the Zacks Consensus Estimate of loss slid to 79 cents from 69 cents over the same time frame.
Weak traffic and aggressive promotions, along with competition from other teen retailers continue to mar this Zacks Rank #3 (Hold) company’s performance. However, the company, under its CEO Julian R. Geiger continues to undertake initiatives to transform and grow its brand. With sustained implementation of operational, marketing and merchandising strategies as well as its cost-curtailment program, Aeropostale hopes to turnaround its performance.
Stocks that Warrant a Look
Better-ranked retail stocks include American Eagle Outfitters, Inc. AEO, Boot Barn Holdings Inc. BOOT and Express Inc. EXPR. All three stocks carry a Zacks Rank #1 (Strong Buy).
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