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Aeropostale Hurt by Charge

NEW YORK — Aeropostale said a charge turned profits into a loss in its second quarter, but the New York-based specialty retailer said it is seeing strong sales in stores with an earlier back-to-school season. <br><br>In the quarter ended Aug. 3,...

NEW YORK — Aeropostale said a charge turned profits into a loss in its second quarter, but the New York-based specialty retailer said it is seeing strong sales in stores with an earlier back-to-school season.

In the quarter ended Aug. 3, the teen retailer’s net loss expanded to $2 million, or 6 cents a diluted share, which included a $3.9 million pre-tax, non-cash charge related to equity based compensation. Excluding the charge, the firm had income of $334,000, or 1 cent. Last year, it recorded a loss of $1.7 million, or 6 cents. Aeropostale finished the quarter 3 cents above consensus estimates for a loss of 2 cents a share.

An additional 44 new stores helped drive total sales up 41.4 percent to $90.1 million from $63.8 million while same-store sales improved 11.2 percent. Women’s comps rose in the high-double-digit range; men’s wear was slightly positive, and accessories were up in the low single digits. Merchandise margins were up significantly as sales shifted towards full-priced merchandise and clearance was down 60 percent per square foot with inventory up 21 percent on a per-square- -foot basis.

“Aeropostale experienced another solid quarter with above-plan sales, margins and earnings,” Julian R. Geiger, chairman and chief executive, said on an afternoon conference call. “I continue to be encouraged by the early read on back-to-school.” He noted that 20 stores in states with an early return to school, including Texas, the second-largest teen state, are reporting comps that are at or above a mid-single-digit comp plan.

Products driving the b-t-s business include graphic T-shirts, knit and woven tops and denim for both men and women as well as skirts and sleepwear.

Referring to b-t-s results thus far, Jeffrey Klinefelter, analyst at U.S. Bancorp Piper Jaffray, said he felt Aeropostale was well positioned within the marketplace. Denim continued to be strong, despite promotional activity elsewhere, he noted. “If people don’t want a brand in the first place, they won’t buy it at another store for $10 less,” he told WWD.

The 335-unit chain is also busy implementing a number of marketing projects to build the brand, including a new interactive Web site as well as a mini-movie for MTV that focuses on teen relationships that will air during the premiere of “Real World.”

This story first appeared in the August 21, 2002 issue of WWD.  Subscribe Today.

Aeropostale said it plans to open an additional 24 stores in the third quarter and one in the fourth, bringing the total number of new stores this year to 84. Next year, 80 locations are planned to open.

Michael?Cunningham, chief financial officer, said on the call that the company is comfortable with consensus estimates for the third and fourth quarters of 50 cents and 52 cents, respectively.

For the six months, net loss narrowed to $1.4 million, or 5 cents a diluted share, compared with income of $3.8 million, or 14 cents. Excluding the compensation-related charge, income for the most recent period was $1.3 million, or 3 cents.