Aeropostale Wraps Up Teen Retail Reports, Expected To End With A Sputter

(Photo credit: Mike Mozart)

The last leg of the teen retailers reports after today’s closing bell. Estimize expects Aeropostale (ARO) to announce Q4 EPS of $-0.03, in-line with the Wall Street consensus, and although negative, a marked improvement from the year ago result of $-0.35. The Estimize consensus for revenue stands at $594M, on par with the Street’s expectation, but still 11% lower than the year ago quarter.

Weakness in the teen retail space is certainly not a new issue, and one that’s been highly publicized this earnings season. Just a few weeks ago Abercrombie and Fitch posted dismal Q4 results, followed by a surprisingly decent report out of American Eagle. It doesn’t look like Aeropostale will be as lucky. Earlier this year they posted a 9% decline in same store sales for November and December, it’s unlikely the retailer saw improved performance in January as market conditions stayed relatively the same.

Part of Aeropostale’s continual decline, now on target to post 9 consecutive quarters of negative profit and revenue growth, has to do with their failed product portfolio. It’s well known that logoed styles are no longer on trend, yet Aeropostale continues to sell merchandise with logos. And any efforts to dismantle these items have not gone over smoothly either, as new merchandise does not seem to be resonating with customers, resulting in market share losses to the likes of Urban Outfitters, Gap, as well as fast fashion retailers H&M, Zara and Forever 21. To remain even the slightest bit competitive, Aeropostale has had to offer margin-crushing discounts.

As a result, the retailer has been aggressively closing stores, currently operating 834 stores in the U.S. and Canada, down from 942 a year ago. As foot traffic in malls continually declines, Aeropostale is one of the names that has seen the biggest impact.