Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of fashion retailer Aeropostale (NYS: ARO) were getting thrown in the dirty hamper by investors today. The stock fell as much as 17% in intraday trading after the company reported second-quarter earnings.
So what: The results from Aeropostale's second quarter actually topped analysts' earnings estimates, even though they looked pretty ugly. Sales dropped 5% from last year, to $468 million, while earnings dove from $0.46 to an adjusted loss per share of $0.02. Wall Street was looking for a $0.03 loss per share on $491 million in revenue.
What may have really sent investors running for the hills, though, was the company's guidance for the upcoming quarter. Management estimated that third-quarter earnings per share will clock in between $0.09 and $0.15. On average, analysts had been anticipating $0.30.
Now what: It'll take a combination of execution and economic cooperation for Aeropostale to right the ship. In its earnings press release, CEO Thomas Johnson said the company wants to find "new ways to connect with our customer." Obviously that's not happening right now and Johnson and Co. will have to figure out a formula to fix that if Aeropostale is to have any hope. Meanwhile, as long as consumers are more worried about jobs and making ends meet than whether their kids are in the latest fashions, Aeropostale, along with all the other teen retailers, will be swimming against the current.
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