Aeropostale Inc.’s (ARO) fiscal second-quarter net income surged 83.3% year over year to $38.6 million. Earnings per share came in at 57 cents, beating the Zacks Consensus Estimate by a penny. The performance was also higher than the company’s upgraded guidance of 54 cents to 55 cents per share announced earlier this month.
The specialty retailer for teenagers recorded a robust 20.1% year-over-year growth in sales to $453 million driven by a 12% expansion in same-store sales. The result was also helped by an 8% growth in weighted square footage as the company added 48 stores across the U.S., Canada and Dubai, compared to the year-ago quarter.
Low-priced teen retailers such as Aeropostale and Buckle Inc. (BKE) have been able to negotiate recessionary headwinds successfully by offering value to price conscious customers. On the other hand, a more expensive competitor, Abercrombie & Fitch Co. (ANF), has recorded a 30% decline in quarterly same-store sales.
Aeropostale’s gross profit grew 31.6% year over year to $165.7 million, while margin swelled 320 basis points (bps) to 36.6%, primarily due to higher merchandise margins coupled lower distribution and transportation costs. SG&A expenses decreased 170 bps as a percentage of sales to 22.4%, on account of better store management and control over corporate expenses. Accordingly, operating income surged 82.6% year over year to $64.4 million, while operating margin swelled 490 bps to 14.2%.
Cash and equivalents at the end of the quarter was $245.5 million, compared to $70.8 million in the year-ago quarter. During the quarter, the company deployed $16.1 million towards capital expenditure and $13.5 million to repurchase 381,000 shares under a $600 million buyback program. Inventory at the close of the quarter was $201 million, up 9% year-over-year in total and up 3% per square feet.
Aeropostale, a specialty retailer of casual apparel and accessories, principally targets 14 to 17 year-old young men and women and also sells merchandise through its e-commerce website. The company recently ventured into the 7 to 12 year-old segment by launching a new concept, P.S. from Aeropostale, taking on the children’s line of Abercrombie & Fitch.
The company also stated that during the quarter it closed the remaining 11 stores of its underperforming Jimmy’Z concept. The company currently operates 887 of its namesake stores across the U.S., 37 in Canada and 7 P.S. from Aeropostale stores.
Moving forward, management expects the momentum to continue in fiscal third quarter and accordingly predicted earnings of 76 cents to 78 cents per share, which is higher than the Zacks Consensus Estimate of 75 cents.
Meanwhile, the Zacks Consensus Estimate on the company’s earnings for the fiscal year ending January 2010 has climbed 7 cents over the past month to $2.94 per share.
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