Aeropostale and Abercrombie Both Fall After Earnings
Earnings from both Aeropostale (NYSE: ARO) and Abercrombie & Fitch (NYSE: ANF) suggest that current conditions in the teen and young-adult retail space are challenging from an operational perspective. Aeropostale released its fiscal first-quarter earnings results after the closing bell on Thursday, while Abercrombie released its Q1 results prior to the open on Friday.
Both stocks were down sharply during Friday's trading session, with ARO down more than 10 percent and ANF off by almost 7 percent. While both stocks are up year-to-date, they have been underperforming the broader market. Aeropostale has added a little less than 14 percent so far in 2013 while ANF is up 5 percent.
For the first-quarter, Aeropostale topped Wall Street earnings and revenue estimates, but the company's second-quarter guidance was substantially below current estimates.
For Q1, Aeropostale reported a net loss of $12 million or $0.16 per share, compared to net income of $10.6 million or $0.13 per share, in last year's corresponding period. This came in slightly ahead of street consensus EPS estimates calling for a loss of $0.17.
Net sales in the quarter were down 9 percent to $452 million from $497 million in last year's first-quarter. This also topped analysts' consensus revenue estimates of $44.26 million.
The company's comparable sales, which includes the e-commerce channel, declined 14 percent versus last year.
"As we had anticipated, our first quarter performance reflected an increase in promotional activity as we cleared through carryover inventory from the fourth quarter. In addition, we were impacted by a weak macroeconomic environment, as well as unseasonably cool weather," said CEO Thomas Johnson.
Looking ahead to Q2, Aeropostale guided for a loss of $0.20 to $0.15 per share. This is well below current consensus EPS estimates calling for a loss of $0.06 in the quarter. Management cited limited visibility and an uncertain macroeconomic environment for the poor outlook.
Abercrombie & Fitch reported a wider than expected loss in the first-quarter and sales which were well below consensus estimates. The company also lowered its full-year earnings per share guidance.
For Q1, Abercrombie reported a loss of $7.2 million or $0.09 per share, compared to a loss of $21.3 million or $0.25 per share, in the year ago period. This compared to Wall Street analysts' consensus EPS estimates calling for a loss of $0.05.
Sales in the period fell 9 percent to $838.8 million versus $921.2 million in last year's first-quarter. This also missed analysts' consensus revenue expectations of $941.66 million by a wide margin.
Total comparable sales in the period, including direct-to-consumer sales, were down 15 percent. Comparable store-sales fell 17 percent.
Looking ahead to Q2, the company guided for earnings per share between $0.28 and $0.33. This compares to current consensus EPS estimates of $0.31.
For fiscal 2013, Abercrombie lowered its EPS outlook. The company now expects earnings per share between $3.15 and $3.25. Previously, Abercrombie had guided for full-year EPS of $3.35 to $3.45 using the cost method of accounting for inventory. Currently, analysts expect the company to report full-year EPS of $3.49 for fiscal 2013.
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