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Aéropostale Swings to Q4 Loss on Sluggish Holiday

The teen retail lowered its first-quarter earnings expectations.

Exterior of an Aeropostale store.

Aéropostale Inc. said flagging holiday sales led to a “disappointing” fourth quarter, causing the company to forecast a loss for the current quarter.

This story first appeared in the March 15, 2013 issue of WWD.  Subscribe Today.

As a result, shares of the teen retailer dropped more than 7 percent to $13.47 in after-hours trading Thursday.

The New York-based firm swung to a net loss of $671,000, or 1 cent a diluted share, for the fourth quarter, ended Feb. 2. This compares with a profit of $26.1 million, or 32 cents, a year earlier.

Excluding impairment charges, Aéropostale’s adjusted net income totaled 24 cents a diluted share. Net sales slid 1.3 percent to $797.7 million from $808.4 million.

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Wall Street expected earnings per share of 22 cents on sales of $775.7 million.

“Our results for the fourth quarter and fiscal year were disappointing. However, we made progress during 2012 against our strategic initiatives,” said chief executive officer Thomas Johnson. “We added new talent to our team, injected more-relevant fashion into our assortments and developed our next-generation store model.”

The company, which posted an 8 percent decline in quarterly same-store sales, said it was pressured to slash prices during holiday to pique demand. This pushed quarterly gross margins down to 19.9 percent of sales from 24.3 percent a year earlier.

The teen retailer predicted a first-quarter loss in the range of 15 cents to 20 cents a diluted share, compared with year-ago earnings of 13 cents. Analysts expected a profit of 8 cents a share. The earnings cut assumes a double-digit same-store sales decline, the retailer said on its conference call to analysts and investors.

“We anticipate a challenging first quarter as a result of expected margin pressures from holiday carryover inventory and the impact of a weak macroeconomic environment,” Johnson said. “We will continue to plan our business conservatively and manage our cost structure carefully. While we face near-term challenges, we believe we have the right strategies and the right team in place to improve the trajectory of our business.”

With increased competition in the mall and an offering rooted in basics, and not fashion looks, Aéropostale said its fiscal 2012 net income took a hit, declining 49.8 percent to $34.9 million, or 43 cents a diluted share. Annual net sales remained steady, creeping up 1.9 percent to $2.39 billion.