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Aeropostale Q1 Preview

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Aeropostale Inc (NYSE: ARO) reports Q1 earnings following the market close Thursday.

The Estimize consensus anticipated EPS of -$0.54 on revenue of $321.74 million. The Wall Street consensus expected EPS of -$0.54 on revenue of $325.33 million.

Heading into its earnings release, Aeropostale traded at $2.51, down 0.4 percent.

Below are recent highlights from analysts on the stock ahead of the Q1 earnings release along with ratings and price targets.

Morgan Stanley - Underweight, $2 price target

The firm estimated Q1 revenue at $346 million with EPS of -$0.53 and thought as of March 12 that “it is unlikely ARO can earn a profit again.”

“ARO burned $93M of cash in FY14: ARO reported $152M in cash and $139M in long-term debt at the end of FY14, or $13M net cash. Once ARO runs out of Sycamore's $150M of financing, it can turn to its $230M revolver. This line is partially restricted until ARO can meet its covenants, but should be mostly available due to collateral backing the loan. However, the revolver is up for renewal in mid-2016. If ARO's 2H15 turnaround is unsuccessful, we think its ability to renegotiate the revolver could be compromised, leading ARO to a potential liquidity crisis. Even if ARO meets our very optimistic forecast outlined below, we estimate a ~$68M FY15 and ~$40M FY16 cash burn.”

UBS - Neutral, $3.25 price target

The firm estimated Q1 revenue at $350 million with EPS of -$0.57.

“ARO is implementing a host of initiatives under the return of Julian Geiger as CEO, including: 1) recent restructuring of the organization, 2) focusing on improving tops (primarily knits, but also wovens), 3) increasing the depth & reducing breadth of assortment, 4) expansion of sub brands (target 15% of business), 5) more targeted product allocation by store, 6) expanded Li & Fung partnership to drive better vendor pricing, 7) an improved testing process. However, we think these changes will take time and weak traffic and customer demand remain key overhangs until at least 2H’15.”

Susquehanna Financial Group - Positive, $5 price target

The firm estimated Q1 EPS at -$0.52.

“Guiding 1Q15 operating loss of $(39)-(45) mln, or an adjusted EPS of $(0.53)-(0.61). Guidance assumes a LDD comp decline, GM expansion, SG&A dollars down ~9%, D&A of ~$10 mln, tax rate of 0% and 79.2 mln shares outstanding. 2015 capex of ~$16 mln. One Outlet location is planned for the year and plan to close 50-75 locations in 2015. In 2015, with the sales pressure related to store closings, management noted SG&A leverage may be difficult, but believes an opportunity exists going forward. AUC for 1H15 is down MSD and is expected to continue in 3Q15.”

Latest Ratings for ARO

DateFirmActionFromTo
Aug 2015Initiates Coverage onPeer Perform
Jul 2015DowngradesNeutralSell
May 2015MaintainsMarket Perform

View More Analyst Ratings for ARO
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Susquehanna Financial Group UBSAnalyst Color Previews Analyst Ratings Trading Ideas

 

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