Aeropostale Turns To Loss, Sees Weak Q3; Stock Sinks 12%

(RTTNews) - Aeropostale Inc. (ARO) Thursday posted a second-quarter loss as the teen-apparel retailer's revenues declined and margins weakened significantly amidst a "challenging teen retail environment."

The retailer also detailed a frail outlook for the third quarter, which is currently indicated to miss Wall Street projections, as it expects the weak trends to continue. Shares of Aeropostale tumbled over 12 percent in the after hours trade, following the news.

New York-based Aeropostale posted second-quarter loss of $33.7 million or $0.43 per share, compared to profit of $71 thousand or breakeven per share last year.

Adjusted loss, which excludes special items, for the quarter was $26.9 million or $0.34 per share. On average, 13 analysts polled by Thomson Reuters estimated a loss of $0.24 per share for the quarter. Analysts' estimates typically exclude special items.

Aeropostale's net sales for the second quarter decreased 6 percent to $454.0 million from $485.3 million a year ago. Comparable sales, or sales from stores open at least a year, for the quarter decreased 15 percent, compared to the prior year. Twenty-four analysts had a consensus revenue estimate of $453.97 million for the quarter.

Gross margin, or percentage of sales left after subtracting cost of sales, declined sharply to 17.9 percent from 25.3 percent last year.

Aeropostale Chief Executive Thomas Johnson blamed weak traffic trends and increased promotional activity amidst a challenging teen retail environment as the reasons for the poor quarterly results. "Our results were particularly disappointing given the level of change we have registered with the Aeropostale brand in recent periods," Johnson added.

Looking forward to the third quarter, Aeropostale expects a loss of $0.21 to $0.26 per share. Analysts currently expect earnings of $0.25 per share for the quarter.

"Our negative outlook for the third quarter reflects the challenges of a highly promotional and competitive teen retail environment which we expect will continue," Johnson continued.

Aeropostale plans to close about 30 to 40 of its stores, compared to its previous plan to close about 15 to 20 stores.

ARO closed Thursday at $10.98, down $0.44 or 3.85%, on the NYSE. The stock further plunged $1.35 or 12.30% in after hours trade.