Aeropostale, Inc.’s (ARO - Snapshot Report) third-quarter fiscal 2014 adjusted loss came in at 45 cents per share, in line with the Zacks Consensus Estimate. However, the loss was much wider than the prior-year quarter’s loss per share of 29 cents and hence dragged the shares down 9.7% during after-market trading hours yesterday. Today the stock dropped another 22%.

Including one-time items, the company’s net loss came in at 66 cents per share as against a loss of 33 cents reported in the year-ago quarter.

Aeropostale’s net sales plunged 12% to $452.9 million, with comparable-store sales (comps), including the e-commerce channel, declined 11% year over year. Net sales came ahead the Zacks Consensus Estimate of $446 million.

Weak traffic and aggressive promotions, along with competition from the other teen retailers, continue to mar Aeropostale’s performance. The company, under its CEO Julian. R. Geiger, continues to undertake initiatives to transform and grow its brand. With sustained implementation of operational, marketing and merchandising strategies, coupled with its cost-curtailment program, Aeropostale hopes to turnaround its performance.

However, higher merchandise margins led to a 70 basis points (bps) improvement in Aeropostale’s adjusted gross margin which came in at 18.8%.

During the quarter, the company opened 3 Aeropostale stores and shuttered 16 Aeropostale stores and 7 P.S. from Aeropostale stores. The company plans to close majority of its estimated 175 store closures in fiscal 2014 in addition to 48 stores closed in fiscal 2013.

In 2015, it expects to ramp up store closures by shuttering another 50-75 stores taking total count to 220-240 stores.

The company operates 842 Aeropostale stores in 50 states and Puerto Rico, 69 Aeropostale stores in Canada and 141 P.S. from Aeropostale stores in 31 states and Puerto Rico.

Financials

Aeropostale ended the quarter with $109.2 million of cash and cash equivalents, $136 million as long-term borrowings and shareholders’ equity of $103.8 million. Moreover, during the quarter, the company incurred $5.9 million of capital expenditure.

The company is keeping its expenses under extreme control. Year-to-date, the company achieved $7.5 million in savings and is on track to achieve $5-$10 million in savings for the current fiscal. Moreover, the company expects to achieve $30-$35 million by fiscal 2015.
 

Looking Ahead

Management expects the promotional environment to linger during the fourth quarter. Moreover, volatility witnessed over the Black Friday weekend has made management cautious.

Given these factors, this Zacks Rank #3 (Hold) stock expects fourth quarter operating loss to range from $28—$34 million. Net loss per share is predicted to be in the band of 37–44 cents.

The current Zacks Consensus Estimate for the fourth quarter is pegged at a loss of 37 cents a share, which is susceptible to a downward revision.

Other Stocks to Consider

Other better-ranked stocks in the same industry include American Eagle Outfitters, Inc. (AEO - Analyst Report), Bebe Stores, Inc. (BEBE - Snapshot Report) and Foot Locker, Inc. (FL - Snapshot Report). All these carry a Zacks Rank #2 (Buy).