Teen apparel retailer Aeropostale (NYSE:ARO) reported an increase of 6% in net sales and 2% in comparable store sales for the first quarter in its release last week.  Given the strong sales this quarter, the company also increased its first quarter earnings guidance to $0.12 – $0.13 per diluted share against the previously issued guidance of $0.08 – $0.1 per diluted share. We believe the Q1 sales results are promising on a quarterly basis and reflect the company’s focus on maintaining balance in its Spring merchandise and the gradually improving macro-economic conditions. Aeropostale competes with Abercrombie & Fitch (NYSE:ANF), Gap Inc. (NYSE:GPS), American Eagle Outfitters (NYSE:AEO) and Urban Outfitters (NASDAQ:URBN) in the teen apparel space.
Aeropostale’s Q1 results reflect gradual improvement
For the first quarter ended April 28, 2012, Aeropostale reported an impressive increase of 6% in net sales. Additionally, the company also reported a comparable store sales increase of 2%. We believe the increase in comparable store sales is probably the most important takeaway for Aeropostale this quarter, as the company had been comping negatively for the past six quarters.
Positive Q1 comparable sales primarily reflect Aeropostale’s focus on maintaining balance in its Spring merchandise especially for women’s apparel. An imbalance in merchandise was the biggest issue plaguing Aeropostale throughout 2011. Along with the decline in comps, the company had to offer massive promotions to clear off piling inventories, which eventually took a toll on its margins. Additionally, an improvement in customer confidence due to the gradually improving macro-economic conditions also contributed to Aeropostale’s improved performance in Q1 2012.Notes: