Analysts Respond to Aeropostale's Weak Results

Analysts respond to Aeropostale, Inc.'s ARO disappointing earnings results. Quarterly Earnings Results

Net sales for the quarter decreased 16 percent from $797.7 million to $670 million from the previous fourth quarter.
Comparable sales decreased 15 percent from the same period a year ago.
E-commerce net revenue for the 2013 fourth quarter decreased 12 percent from 2012 to $85.6 million.
Aeropostale posted a net loss of $70.3 million, or $0.90 per share.

Fiscal Year Earnings Results

Net sales decreased 12 percent from $2.386 billion in the 2012 fiscal year to $2.091 billion
Comparable sales were down 15% compared with a two percent decrease in the same period last year.
Net loss was $141.8 million, or $1.81 per diluted share.
E-commerce net revenues were roughly flat at $217.6 million compared with $217 million a year ago.
Aeropostale ended the year with $106.5 million in cash and cash equivalents.

Analysts Respond

Morgan Stanley Kimberly Greenberger predicts Aeropostale will run out of cash by the end of the first quarter, noting the “ballooned” accounts payable from delayed rent payment. The analyst reported that the company will likely “burn” through $92 million in the 2014 fiscal year. Morgan Stanley wrote, “ARO announced $150M in financing from Sycamore Partners. The risk is this new credit does not hold off liquidity concerns for long. ARO can then turn to its $230M credit facility. However, we believe there is a very high probability ARO will not be debt free again in the foreseeable future.”
Dorothy Lakner from Topeka Capital Markets noted the “financial breathing room” offered by the Sycamore partnership. The analyst remarked on the “aid in reducing store count, expenses and product costs,” adding that it will take time to see the impact on earnings results. Topeka lowered the price target on Aeropostale from $7.00 to $6.00.
Mizuho analyst Betty Chen “applaud(s) ARO's actions to consider accelerated store exits”, noted February's AUR gain from fasion and sub-label assortments, and the company's continued progress with international expansion. The neutral rated analyst criticized the size of company's product mix which makes up only 15 to 20 percent.