Aeropostale Reiterates Q4 Earnings Outlook, Gets a Boost as Peers Tumble

Aeropostale’s (NYSE:ARO) stock gained 5% on Thursday, after the disclosure of holiday sales results. ^[1] Though Aeropostale reported a holiday sales decline of  5% and comp sales decline of 10% compared to previous year, the company managed to obviate the trend of its competitors issuing lower guidance by reiterating its previous Q4 earnings outlook. In comparison its major competitor American Eagle Outfitters’ (NYSE:AEO) stock crashed by 11% after it decreased its earnings outlook despite solid holiday sales. Aeropostale competes with the likes of Abercrombie & Fitch (NYSE:ANF), Gap Inc. (NYSE:GPS), Urban Outfitters (NASDAQ:URBN) in the teen apparel space.

Trefis price estimate for Aeropostale’s stock stands at $20.66, implying an upside of nearly 30% to the current market price.

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Aeropostale Holiday Results on Expected Lines

Aeropostale suffered from the lack of a broad range across its product mix in Q3, and the trend was expected to remain throughout the holidays. Although the company remained highly promotional, Aeropostale was able to control its inventories well during the holidays, thus negating much impact on its margins.

Inventory management remained a tough nut to crack for its peers like American Eagle which were forced to do aggressive promotions in late December after they were left with higher than comfortable inventories, thus taking a toll on their earnings outlook. On the other hand reiteration of Q4 earnings outlook by Aeropostale found a welcomed response from the investors.

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1. Aeropostale Reports Holiday Sales Results, Source: Aeropostale’s IR [↩]