Aéropostale Shines in Second Quarter, but Not Some of Its Mall Competitors

Specialty continues to be pressured heading into the second half.

A continued focus on managing inventories was one of the themes from among several of the specialty stores that posted second-quarter results on Thursday.

This story first appeared in the August 22, 2008 issue of WWD.  Subscribe Today.

Driven by strong back-to-school merchandise assortments, second-quarter profits surged 43.2 percent on Thursday for teen retailer Aéropostale Inc.

For the quarter ended Aug. 2, the New York-based company posted profits of $21.1 million, or 31 cents a share, compared with profits of $14.7 million, or 19 cents, for the same year-ago period, meeting analysts’ expectations. Net sales jumped 21.2 percent to $377.1 million, from $311.2 million for the comparable period last year. Same-store sales jumped 11 percent compared with a decrease of 4 percent last year.

“Our back-to-school merchandise assortments have been positively received by our customers, and we believe that we are well positioned as we head into the second half of the year,” said Julian R. Geiger, chairman and chief executive officer.

The mall-based specialty retailer said it anticipates third-quarter earnings per share in the range of 59 cents to 61 cents a diluted share. Analysts polled by Yahoo Finance estimate Aéropostale’s EPS to be 60 cents a share.

Pacific Sunwear of California Inc. turned a corner, reporting second-quarter earnings of $2.8 million, or 4 cents a share, after losing $10.5 million, or 15 cents, in the same period last year, yet the company still missed analysts’ estimates.

The Anaheim, Calif.-based company reported profits from continuing operations of $3.71 million, or 6 cents a share, down from $9.26 million, or 13 cents a share, last year. Analysts surveyed by Yahoo Finance anticipated EPS of 6 cents. Sales were up by 0.3 percent to $312.7 million, compared with $311.8 million last year.

“Although our earnings for the second quarter were in line with our expectations, our results continue to reflect the impact of a weakening economy on the retail sector,” said ceo Sally Frame Kasaks. “With the possibility of an even tougher environment ahead, we plan to maintain strong operating discipline while weathering these economic headwinds in order to position our business for success when the environment improves.”

The Wet Seal Inc. posted a 50 percent jump in income to $10.1 million, or 10 cents share, from $6.8 million, or 7 cents, last year. Sales gained 4 percent to $149 million from $143.3 million. Consolidated comps fell by 4.4 percent, while comps for Wet Seal fell by 1.8 percent, and for Arden B. by 13.8 percent.

Ed Thomas, ceo, said ongoing cost and inventory management initiatives helped the firm generate operating margins of nearly 8 percent of sales, and that it will need to continue to manage costs and inventory at least through yearend, due to the sluggish retail environment.

Action-sports retailer Zumiez Inc. saw its second-quarter results fall by 13.6 percent to $4.1 million, or 14 cents a diluted share, from $4.7 million, or 16 cents, in the same year-ago quarter. Sales rose 13.2 percent to $171 million from $150.8 million, while comps declined by 1.7 percent versus the 11.6 percent gain a year ago.

Rick Brooks, president and ceo, said, “We continue to make positive strides in our ongoing efforts to give our customers a unique specialty retail experience, while controlling costs and effectively managing inventories during this very difficult operating environment.”

The retailer lowered its fiscal 2008 earnings outlook to between 80 cents and 82 cents a diluted share from its previous expectations of between 90 cents and 93 cents, due to the ongoing lackluster macroeconomic environment.

Second-quarter results were for the period ended Aug. 2.

Bebe Stores Inc., which reported fourth-quarter results Thursday, said profits shrunk 18.7 percent as both same-store sales and gross margins declined.

For the quarter ended July 5, the Brisbane, Calif.-based company posted income of $16 million, or 18 cents a share, compared with earnings of $19.7 million, or 21 cents, for the same period in 2007. Same-store sales declined 5.6 percent on top of the 5.7 percent decrease for the comparable quarter last year. Gross margin as a percentage of total sales dipped to 45.8 percent, compared with 48.1 percent a year ago, due to increased inventory, outbound freight expense and unfavorable occupancy leverage.