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Aeropostale Unveils Plans for Kids’ Concept

Aeropostale's fourth-quarter profits rise 5.4 percent as comps rise 6%.

Aeropostale Inc.’s long-awaited children’s concept now has a name and, beginning in mid-June, a home market.

As the New York-based specialty retailer disclosed a 5.4 percent increase in fourth-quarter profits late Thursday, it said it will open 10 stores under the P.S. From Aéropostale banner this year clustered around the New York metropolitan area. The stores will target boys and girls aged seven to 12, and offer “trend-right” casual apparel and accessories at “compelling values,” the company said.

The girls’ merchandise assortment will be larger than the boys’, said Mindy Meads, Aéropostale’s president and chief merchandising officer, but “boys is a great distinguisher for us” since most mall competitors focused on this age group concentrate on girls.

Julian Geiger, chief executive officer, commented, “We have watched with amazement for years how moms come shopping to Aéropostale with an older and younger sibling, with the younger sibling desperately trying to fit into the merchandise that was obviously too big for them.”

With the launch of P.S. by Aéropostale, preteens “can finally find merchandise that looks like Aéropostale, that comes from Aéropostale but which will have a different brand representation, different name than Aéropostale.”

In the quarter ended Jan. 31, the company posted net income of $68.2 million, or $1.01 a diluted share, up from $64.7 million, or 95 cents a share, last year. Sales grew to $690 million, 16.7 percent above the comparable period’s $591.3 million. Comparable-store sales rose 6 percent in the quarter.

At the flagship division, Meads said that in the fourth quarter, women’s comps sales were up in the midsingle digits while men’s rose in the high-single digits. Tops were a standout for both genders.

The company, with 874 units, plans 40 new Aéropostale stores this year in addition to the new P.S. doors.

The company said it expects first-quarter earnings per share to be between 22 and 24 cents, including a 3-cent-a-share charge for the recent shuttering of its 11-unit Jimmy’Z business.

For the full year, Aéropostale’s profits rose 15.7 percent to $149.4 million, or $2.21 a share, from $129.2 million, or $1.74 a share, in fiscal 2007. Sales climbed 18.5 percent to $1.89 billion from $1.59 billion while comps were up 8 percent.

Also on Thursday, Pacific Sunwear of California Inc. reported that it swung to a fourth-quarter loss and more than doubled the full-year loss from a year ago.

For the three months, the loss was $27.1 million, or 42 cents a share, against income of $5.2 million, or 7 cents, in the year-ago quarter. Excluding special items, the fourth-quarter loss was 47 cents a share.

Sales in the fourth quarter fell 8.5 percent to $351.7 million from $384.3 million as comps decreased 10 percent.

Sally Frame Kasaks, chief executive officer, said last year PacSun took a proactive approach to business, closing the underperforming D.e.m.o. division, exiting the lagging sneaker business and consolidating to a single distribution center. The retailer exceeded its goal of a merchandise mix of more than 80 percent apparel, 51 percent of it in juniors.

The company has deferred nearly all of its store renovation projects into 2010, and plans to open just three stores in 2009. Over the next three years, it will evaluate for renewal leases covering nearly one-third of its current fleet of 932 units. It expects to close 35 to 50 stores a year as leases expire.

PacSun expects a first-quarter loss of 26 to 31 cents a share with a same-store sales decline in the low-20s.

For the year, the loss was $63.8 million, or 96 cents, from a loss of $30.4 million, or 44 cents, in 2007. Sales declined 3.9 percent to $1.25 billion from $1.31 billion.