Aeropostale Delivers Disappointing Revenue and Another Loss

Aeropostale Inc. (NYSE: ARO) has reported results for the second quarter of its fiscal 2015. Net sales fell 17% to $326.9 million, and its comparable sales, which include the e-commerce channel, fell by 8% (versus a 13% decrease for the same period a year ago). The company has to call these results rather than earnings — it lost $43.7 million in the quarter, which translates to -$0.55 in earnings per share.

Aeropostale reported an adjusted net loss of $44.8 million, or $0.56 per diluted share. Thomson Reuters had estimates at -$0.55 EPS and $335.7 million in revenues. Where the report becomes difficult to compare is that its operating loss was $37.4 million and an adjusted operating loss of $38.6 million.

The following items were noted as special in the report:

  • An after-tax charge of approximately $2.9 million, or $0.04 per diluted share, resulting from store closing costs
  • An after-tax charge of $2.4 million, or $0.03 per diluted share, due to consulting fees
  • An after-tax benefit of $6.4 million, or $0.08 per diluted share, due to reversals of previously established exit cost obligation liabilities resulting from subsequent lease terminations

Aeropostale gave third quarter guidance as well. Its operating losses are expected to be $19.0 million to $25.0 million, or $0.30 to $0.38 per diluted share. That is based on an effective tax rate of approximately 4.0%, and it excludes store impairments, accelerated store closing costs that may be identified and consulting fees.

Julian R. Geiger, chief executive officer of Aeropostale, said:

The second quarter was an important transitional time for us in which we set the stage for the second half of the year. We attained very high levels of merchandise currency, we delivered our new back to school merchandise, and we refocused our marketing efforts around key items, all while attaining operating results consistent with the better end of our guidance… We are encouraged by our progress during the initial part of the Back-To-School season, especially the significant improvement in our girls business. Our third quarter outlook reflects a continuation of the momentum we have generated in the quarter-to-date period. This guidance indicates a significant reduction in operating loss versus last year.

The company closed 23 Aeropostale stores during the quarter. For the second quarter, the company invested $6.0 million in planned capital expenditures.

Aeropostale ended the quarter with cash and cash equivalents of $86.5 million. The company also ended the quarter with $142.7 million in long-term debt. On August 18, 2015, Aeropostale closed on an amended $215 million credit facility, which now expires in February 2019 at the earliest. The company said this new facility “aligns with the company’s current asset base and increases overall availability as compared to the previous credit facility.”

Aeropostale shares closed up 10% at $1.26 in the regular session, but its shares were indicated down 8% at $1.16 in the after-hours session. The company’s market cap was $100 million as of the closing bell, and its 52-week range is $1.02 to $4.39.

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