Wall Street Watch: Why Aeropostale Is Flying Low This Season


It's not shaping up to be much of a holiday shopping season for Aeropostale (ARO).

The trendy apparel retailer posted better than expected quarterly results after Wednesday's market close, but any good feelings were stamped out when it offered up problematic guidance for the current quarter.

Aeropostale is looking for an adjusted profit to clock in between $0.36 a share and $0.41 a share for the holiday quarter. Analysts were expecting $0.54 a share on the bottom line.

The mall chain didn't offer up sales guidance, but it won't be as bad a miss as the company's new profit target suggests. The retailer's CEO is weary of the "highly promotional environment" in the industry, and that means that mall chains have had to discount aggressively to convert store traffic into ringing registers.

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Margins have a cruel way of contracting in this climate, hence the sloppy outlook for the company's profitability.

It's not as if the back-to-school quarter was all that spectacular. Same-stores sales slipped 2 percent if you back out online sales, and that's after a 9 percent decline a year earlier. Put another way, the average store is selling 11 percent less than it was two years ago.

However, with margins getting pinched this critical holiday shopping season, it's easy to see why shares of Aeropostale are likely going to descend today.

Other Things Worth Watching

• PC makers better start thinking outside of the box before they start living in one. Credit rating agency Moody's lowered its credit profile for Hewlett-Packard (HPQ) on Wednesday afternoon. Last week's gargantuan charge in writing down last year's Autonomy acquisition isn't helping, but HP's real problem is that folks aren't buying desktops, laptops, and printers the way they used to.

• Disney (DIS) is giving its shareholders some more park-spending money. The family entertainment giant is boosting its annual dividend 25 percent to $0.75 a share. Disney is timing the distribution so that it's payable on Dec. 28, making it the latest company to schedule a dividend for late December to spare investors that tax rate hike on qualified dividends that will likely kick in next year. All of Disney's previous annual disbursements had been payable in January.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article, except for Disney. The Motley Fool owns shares of Walt Disney. Motley Fool newsletter services have recommended buying shares of Walt Disney.

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