After seven straight quarters of losses, it largely goes without saying Aeropostale Inc. (NYSE:ARO) investors probably aren’t expecting much from the company’s fourth-quarter numbers due after the close on Thursday.
Analysts are collectively looking for a loss of four cents per share of ARO, on $577.75 million in sales.
That loss would be narrower than the year-ago loss per share of Aeropostale stock, though the revenue total from the Aeropostale earnings report from Q4 of 2013 was considerably bigger than the revenue forecast for Q4 of 2014.
Perhaps more importantly, owners of ARO have to be wondering if the upcoming Aeropostale earnings announcement is going to be the one that shows some glimmer of hope for the struggling company,
Aeropostale Earnings Outlook
As was noted, analysts expect Aeropostale to report a loss of four cents per share for the previous quarter, which includes the all-important holiday shopping period.
That would be a sharp improvement on the loss of 35 cents per share of ARO booked in the fourth quarter of 2013. Nevertheless, it can’t be a reason to get too excited. The projected top line of $577 million in sales is nearly 14% lower than the Q4-2013 sales total of $670.0 million.
And it’s not as if the company suddenly hit a wall. On a full-year basis, the company is on pace to report a loss of $1.47 per share of ARO, versus a loss of $1.13 per share in 2013. The likely 2014 sales figure of $1.83 billion will be nearly 13% weaker than 2013’s total of $2.09 billion, if analysts are on target about the Aeropostale earnings numbers due after the close on Thursday.
With all of that being said, don’t be shocked if ARO reports some pretty bad results. Competitor Abercrombie & Fitch Co. (NYSE:ANF) certainly did.
All told, though Abercrombie & Fitch meet analyst estimates by reporting income of $1.15 per share, it was still well below the year-ago bottom line of $1.34 per share of ANF, and total net income slipped from $104.3 million in the fourth quarter of 2013 to $80.8 million this time around.
Worse, Abercrombie & Fitch watched its fourth quarter year-over-year revenue slide nearly 14% to $1.12 billion, painfully short of the projected top line of $1.17 billion. Same-store sales slumped 10% for Abercrombie in the fourth quarter.
Point being, though Abercrombie & Fitch has admittedly created some of its own problems, it may also suffering due to an external trend that could just as well be dragging Aeropostale down too. Some analysts certainly believe this is the case.
Some Things for Owners of Aeropostale Stock to Mull
Though the late-February downgrade of Abercrombie & Fitch to an underweight rating was company-specific, Morgan Stanley was more than willing to note it’s just as pessimistic on Aeropostale and American Eagle Outfitters (NYSE:AEO).
The concern is that the entire segment (teen apparel) is on the midst of a secular decline … and it’s not as if any of the three retailers in question have any evidence — like sales or earnings growth — to refute Morgan Stanley’s concern.
Wunderlich Securities chimed in more recently about ARO, saying Tuesday morning:
“We are reiterating our Hold rating and price target on shares of Aeropostale (ARO) and rolling out slightly more aggressive FY16 projections and a FY17E loss per share of $0.43 with the company announcing results after the close on Thursday. We believe Aero has continued to make progress into the Spring season in terms of inventory and looks; that said, we believe the name still remains under tremendous operating and pricing integrity pressure, which we do not see abating in the nearer term.”
It sound like analyst-speak for, “We’ve got some serious doubts about the company’s future.”
Bottom Line for ARO
Anything is possible, but that’s not to say anything is likely. In fact, given the company’s history and the environment for teen apparel retailing right now, even the projected loss of only four cents per share of ARO seems oddly optimistic.
There’s a decent chance Thursday’s Aeropostale earnings news could quell the feeble recovery effort underway for the stock, and renew a downtrend that extends back for years. Tread lightly.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
