WWD.com/fashion-news/fashion-features/what-to-watch-aeropostale-s-turbulence-741057/

The coming year will be a big test for the newly public Aeropostale chain.

This story first appeared in the December 26, 2002 issue of WWD.  Subscribe Today.

Founded in 1987,the chain started as a division of R.H.Macy &Co.,but was bought in 1998 by a team of investors from then-owner Federated Department Stores.Aeropostale hit the NYSE on May 16.Shares of Aeropostale Inc.kyrocketed in the teen specialty retailer ’s first day of trading,climbing $9.70,or 53.9 percent,to close at $27.70. It priced at $18 in an initial public offering that raised $225 million.

But turbulence soon set in,when the New York-based chain posted an 8.3 percent decrease in its third-quarter profits on Nov.2.For the three months ended Nov.2,its income dropped to $15 million or 39 cents a share,at the upper end of its revised guidance.

Income in the year-ago quarter was $16.4 million or 45 cents,including rev- enue of $1.6 million related to an accounting change for negative good- will.Excluding the gain,earnings were 40 cents.Sales urged 34.3 percent to $169.2 million from $126 million,includ- ing results from 88 new stores,and com- parable-store sales rose 5 percent. Gross margins kidded down 870 basis points because of the increased promo- tional activity.

But that could be the answer to the chain ’s problems.For its first ad cam- paign,the store went with MTV.With an ad budget of $8 million,the com- mercials were scheduled to air a short films,panning an unusual 2 1/2 minutes each.When it ran into finan- cial troubles,the company was forced to pull some of those spots,but till plans to capitalize on its newly designed Web site as well as product placement on TV.

Things seem to be looking up,howev- er.The trendy teen chain,which now runs more than 350 stores,raised the outlook for the fourth quarter and full year.Aeropostale expects quarterly earnings to land between 38 and 40 cents a share,with ales in the range of $204 million to $207 million versus prior guidance in the range of $199 million to $202 million.

On a full-year basis,the firm said it is forecasting earnings of roughly 81 to 83 cents,excluding a pretax,noncash charge related to equity-based compen- sation of $4.5 million incurred in the first half of the year.It also said it expects ales of $671 million to $674 mil- lion.For 2003,it said it expects earnings in the range of $1.06 to $1.10 and sales between $671 million and $674 million.

The coming year will be a big test for the newly public Aeropostale chain.

Founded in 1987,the chain started as a division of R.H.Macy &Co.,but was bought in 1998 by a team of investors from then-owner Federated Department Stores.Aeropostale hit the NYSE on May 16.Shares of Aeropostale Inc.kyrocketed in the teen specialty retailer ’s first day of trading,climbing $9.70,or 53.9 percent,to close at $27.70. It priced at $18 in an initial public offering that raised $225 million.

But turbulence soon set in,when the New York-based chain posted an 8.3 percent decrease in its third-quarter profits on Nov.2.For the three months ended Nov.2,its income dropped to $15 million or 39 cents a share,at the upper end of its revised guidance.

Income in the year-ago quarter was $16.4 million or 45 cents,including rev- enue of $1.6 million related to an accounting change for negative good- will.Excluding the gain,earnings were 40 cents.Sales urged 34.3 percent to $169.2 million from $126 million,includ- ing results from 88 new stores,and com- parable-store sales rose 5 percent. Gross margins kidded down 870 basis points because of the increased promo- tional activity.

But that could be the answer to the chain ’s problems.For its first ad cam- paign,the store went with MTV.With an ad budget of $8 million,the com- mercials were scheduled to air a short films,panning an unusual 2 1/2 minutes each.When it ran into finan- cial troubles,the company was forced to pull some of those spots,but till plans to capitalize on its newly designed Web site as well as product placement on TV.

Things seem to be looking up,howev- er.The trendy teen chain,which now runs more than 350 stores,raised the outlook for the fourth quarter and full year.Aeropostale expects quarterly earnings to land between 38 and 40 cents a share,with ales in the range of $204 million to $207 million versus prior guidance in the range of $199 million to $202 million.

On a full-year basis,the firm said it is forecasting earnings of roughly 81 to 83 cents,excluding a pretax,noncash charge related to equity-based compen- sation of $4.5 million incurred in the first half of the year.It also said it expects ales of $671 million to $674 mil- lion.For 2003,it said it expects earnings in the range of $1.06 to $1.10 and sales between $671 million and $674 million.