Has Aeropostale Lost Momentum? - Analyst Blog

It seems that investors are losing confidence in Aeropostale, Inc. ARO, after this specialty retailer of casual apparel and accessories disappointed with its fourth-quarter fiscal 2013 performance. Shares of this Zacks Rank #4 (Sell) stock have dropped about 24% since the earnings announcement on March 13, whereas year-to-date the stock has fallen roughly 39%.

Estimates for Aeropostale have shown a downtrend since the company posted the results. The softness in results triggered a downtrend in the Zacks Consensus Estimates, as analysts become less constructive on the stock's future performance.

This is evident from the movement witnessed in the Zacks Consensus Estimate that widened from a loss of 71 cents to a loss of $1.47 per share for fiscal 2014 in the past 30 days. For fiscal 2015, the Zacks Consensus Estimate of loss increased to $1.17 from a loss of 49 cents in the same period.

Aeropostale reported adjusted loss per share of 35 cents in the quarter, much wider than the Zacks Consensus Estimate of a loss of 30 cents. The company had recorded earnings of 24 cents in the year-ago quarter. Declining traffic and higher promotional expenses had a deeper-than-expected impact as the loss came wider than the guided range of 24–32 cents per share.

This teen apparel retailer witnessed a tough 2013 as it reported continuous losses throughout the year. The top line during the quarter fell 16.0% to $670.0 million, lagging the Zacks Consensus Estimate of $699.0 million.

Comparable-store sales, which include Aeropostale's e-Commerce business, declined 15% in the quarter due to a 12% fall in transactions and 3% fall in average unit retail, partly offset by a 1% increase in units per transaction.

Other Stocks that Warrant a Look

Other better-ranked retail stocks that look promising and are expected to continue with their upbeat performance include Michael Kors Holdings Limited KORS and Hanesbrands Inc. HBI both sporting a Zacks Rank #1 (Strong Buy), along with G-III Apparel Group, Ltd. GIII holding a Zacks Rank #2 (Buy).