Stock trading: Rising costs hurt Aeropostale earnings

Aeropostale Inc., symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 974 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 57 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children. We analyze Aeropostale in Stock Pickers Digest, our newsletter for aggressive stock trading. In the three months ended April 30, 2011, Aeropostale’s sales rose 1.2%, to $469.2 million from $463.6 million. Same-store sales declined 7%, compared with an increase of 8% a year earlier. Sales from the company’s e-commerce business jumped 18.5%, to $28.2 million from $23.8 million. Despite the higher sales, Aeropostale’s earnings dropped 63.9%, to $16.4 million from $45.4 million a year earlier. During the quarter, the company bought back 4.2 million of its shares for $100.1 million. Due to fewer shares outstanding, the stock trading pick’s earnings per share fell 58.3%, to $0.20 from $0.48. The company’s costs rose sharply in the latest quarter, especially for clothing, due to a sharp rise in the price of cotton. Aeropostale also had to offer big discounts to clear spring inventory to position itself for the key back-to-school shopping season. We updated our stock trading advice on Aeropostale in our May 27, 2011 Stock Pickers Digest hotline, which you can immediately view when you take a 1-month free trial to Stock Pickers Digest. Click here to get started right away. (Note: If you are a current Stock Pickers Digest subscriber, please click here to view Pat’s recommendation. Be sure to log in first.)

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Scott Clayton

Scott is an associate editor at TSI Network. He is the lead reporter and analyst for Dividend Advisor, Power Growth Investor and Canadian Wealth Advisor and a member of the Investment Planning Committee. Scott began his investment and financial career working with Pat McKeough at The Investment Reporter in the 1980s. Subsequently, he worked at the Financial Post Corporation Service for 10 years. He joined TSI Network in 1998. He is a Bachelor of Economics graduate of York University, and he also has an M.B.A. from the Schulich School of Business.

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