Aeropostale Earnings Preview

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Investors hope Aeropostale (NYS: ARO) will top analyst estimates once again after beating predictions by $0.01 in the previous quarter. The company will unveil its latest earnings on Wednesday, Nov. 30. Aeropostale is a mall-based retailer that sells casual apparel and accessories for young adults.

What analysts say:

  • Buy, sell, or hold?: Analysts think investors should stand pat on Aeropostale, with 15 out of 24 analysts rating it hold. Analysts don't like Aeropostale as much as competitor Zumiez overall. Ten out of 19 analysts rate Zumiez a buy compared to seven out of 24 for Aeropostale. Analysts still rate the stock a hold, but they are a bit more wary about it compared to three months ago.
  • Revenue forecasts: On average, analysts predict $576.4 million in revenue this quarter. That would represent a decline of 4.4% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.27 per share. Estimates range from $0.12 to $0.29.

What our community says:
CAPS All-Stars are solidly behind the stock, with 94.9% granting it an outperform rating. The community at large backs the All-Stars, with 94.2% assigning it a rating of outperform. Fools are bullish on Aeropostale and haven't been shy with their opinions lately, logging 401 posts in the past 30 days. Even with a robust four out of five stars, Aeropostale's CAPS rating falls a little short of the community's upbeat outlook.

Management:
Aeropostale's income has fallen year over year by an average of 44.2% over the past five quarters. A year-over-year revenue decrease last quarter snaps a streak of three consecutive quarters of revenue increases. The company's gross margin shrank by 13 percentage points in the last quarter. Revenue fell 5.4% while cost of sales rose 14.2% to $354.2 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters.

Quarter

Q2

Q1

Q4

Q3

Gross Margin

24.4%

29.1%

35.5%

36.6%

Operating Margin

1.2%

5.9%

17.1%

16%

Net Margin

0.6%

3.5%

10%

9.7%

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Earnings estimates provided by Zacks.

At the time this article was published

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