Teen specialty retailer Aeropostale (NYSE:ARO) is scheduled to announce its Q2 fiscal 2012 earnings results on August 16.  Having disclosed its quarterly revenues and comparable sales growth in its August 2 update,  we expect Aeropostale’s gross margins to be the focus of its Q2 earnings. Aeropostale competes with the likes of Abercrombie & Fitch (NYSE:ANF), Gap Inc. (NYSE:GPS), Urban Outfitters (NASDAQ:URBN) and American Eagle Outfitters (NYSE:AEO) in the teen apparel space.
Margins to Remain Center of Attention
With the company already disclosing its quarterly revenues and comparable sales growth in its August 2 update, margins are expected to be the major focus on Thursday. Earlier, Aeropostale had reduced its Q2 earnings estimates from $0.03-$0.05 per share profit to $0.0 in its last business update, which saw its stock crashing by 33% immediately after the disclosure. See: Aeropostale’s Stock Nosedives After Disappointing Q2 Revenue Update
Taking cues from the reduction in earnings estimate, we expect the margins to decline on a q-o-q basis. However, margins should improve compared to Q2 last year as Aeropostale is expected to benefit from declining cotton prices and the reduction in promotional stance of the U.S. teen apparel market. Inventory levels will be a key factor to watch for as well. A higher than desired inventory level could essentially mean that Aeropostale might have to increase its promotional scales on merchandise for the remaining back-to-school season, which can dent its margins further, going forward.Notes: