Shares of Aéropostale Inc. dropped 10.3 percent in after-market trading Thursday after the teen retailer reported a 93.3 percent decline in second-quarter profits and said it expected third-quarter earnings to fall below Wall Street estimates.
This story first appeared in the August 19, 2011 issue of WWD. Subscribe Today.
Chief executive officer Thomas Johnson told analysts and investors on a conference call that the company experienced weakening trends in June and July, as a result of “sharply lower consumer demand.”
“In response, we increased both the depth and breadth of our promotions and our markdowns in order to move through our spring and summer merchandise,” he said. “This action resulted in significantly lower-than-expected sales and gross margins for the second quarter.”
This dynamic led the company to project third-quarter earnings of between 9 cents and 15 cents a share, where analysts were forecasting a 30-cent profit.
The after-market stock drop pushed shares down to $11.18, following on the stock’s 2.4 percent decline during the regular trading day.
Fashion missteps, especially in its women’s division, weighed down the retailer’s second-quarter net income, which totaled $2.9 million, or 4 cents a diluted share. This compared with year-ago income of $43.6 million, or 46 cents a share. Adjusting for a nonrecurring benefit, the company posted losses of 2 cents a share, which was slightly better than the 3 cent loss Wall Street anticipated.
Net sales slid 5.4 percent to $468.2 million from sales of $494.7 million a year earlier.
Same-store sales fell 14 percent, as heavy markdowns caused quarterly gross margin to slide to 24.4 percent of sales from year-ago margin of 37.3 percent.