Aeropostale Earnings Preview: Trends We’re Watching
Teen specialty retailer Aeropostale (NYSE:ARO) is scheduled to announce its Q4 earnings results on March 8. [1] A quick scan of the stock’s recent performance Aeropostale is on a roll in 2012. The stock has gained roughly 19% since January 3, thanks to a positive impulse from holiday sales update on January 5 and continued positive momentum thereafter. Here we highlight a few key trends to watch for in the upcoming earnings release. 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.
See our full analysis of Aeropostale
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Margins to Remain in Focus
With the company’s disclosure of net sales and comparable sales for Q4 in its January 5 sales update, the focus has now centered around margins. Although Aeropostale reported a holiday sales decline of 5% and a comparable sales decline of 10% compared to previous year, it reiterated its previous Q4 earnings outlook, thereby obviating the trend of lower guidance issued by its competitors.
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Taking cues from the company’s reiterated earnings outlook and current inventory levels, we expect the Q4 margins to tread the market expectations. Inventory levels will be a key metric to watch for, as the pending inventories will eventually decide how long Aeropostale takes to benefit from the declining cotton prices.
Watching Updates on Aeropostale’s 3 Tier Long-Term Growth Strategy
In its 2012 spring presentation, Aeropostale’s president, Michael J. Cunningham, announced the three long-term growth strategies for Aeropostale. These include international expansion, increasing the scale of direct business and growth in P.S. from Aeropostale stores. [2] We will keenly watch for any updates in this regard.
Aeropostale also expanded its international presence to Turkey in November 2011. [3]
The Q4 earnings may also give an update on whether Aeropostale plans to enter emerging markets such as China, which is becoming a focal point of the global apparel industry.
Understand How a Company’s Products Impact its Stock Price at Trefis
- Aeropostale to announce Q4 earnings on March 8th, Source: Aeropostale IR [↩]
- Aeropostale’s 2012 Spring Presentation, Source: Aeropostale’s IR [↩]
- Aeropostale enters Turkey, Source: Aeropostale’s IR [↩]