Aeropostale (ARO): What will Q2 Earnings Release Unveil?

Aeropostale, Inc. ARO, a mall-based specialty retailer of casual apparel and accessories for young women and men, is set to report its second-quarter fiscal 2015 results on Aug 27. Last quarter, the company posted a negative earnings surprise of 1.8%. Let us see how things are developing for this announcement.

Factors Influencing the Quarter

Weak traffic, along with competition from other teen retailers, is likely to affect Aeropostale's quarterly results.

Given these odds, the company estimates net loss in the band of 52–60 cents a share for second-quarter fiscal 2015. The guidance is based on the company's anticipation of low to mid-single-digit decrease in comparable-store sales.

Moreover, Aeropostale has been under tremendous pressure due to a challenging teen retail environment. However, to battle dwindling revenues, the company has taken to international expansion in a big way. In July, the company announced that it has entered into licensing agreements with India-based Arvind Lifestyle Brands Limited and Indonesia-based PT Mitra Adiperkasa TBK with an aim to expand in these countries.

Further, the company continues to undertake a number of initiatives, such as retail store downsizing, effective merchandising management and cost curtailment, in order to turn around its performance.

Earnings Whispers

Our proven model does not conclusively project Aeropostale as likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, #2 or #3 for this to happen. This is not the case here, as you will see below.

Zacks ESP: ESP for Aeropostale is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate stand at a loss of 56 cents.

Zacks Rank: Aeropostale carries a Zacks Rank #2 (Buy). Though a Zacks Rank #2 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Rank #4 and #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

Campbell Soup Company CPB has an Earnings ESP of +4.76% and a Zacks Rank #2.

Dollar General Corporation DG has an Earnings ESP of +1.06% and a Zacks Rank #2.

Five Below, Inc. FIVE has an Earnings ESP of +7.69% and a Zacks Rank #2.

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