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Aeropostale (ARO) Earnings: What to Expect

NEW YORK (TheStreet) -- Aeropostale (ARO - Get Report) is popping ahead of its fourth-quarter earnings report after the bell Thursday.

By midafternoon, shares had added 3.5% to $7.50.

Trading volume of 5.1 million had exceeded its three-month daily average of 3 million.

Analysts surveyed by Thomson Reuters expect the teen apparel retailer to post a net loss of 31 cents a share for the three months to January as heavy discounting amid an aggressively promotional holiday season takes its toll on profitability. That compares to net income of 24 cents a share in the year-ago quarter.

Must Read: Why Christopher & Banks Corporation (CBK) Is Popping on Thursday

Revenue is expected to fall 14.3% to $683.79 million from $797.71 million a year earlier.

For the full year, analysts anticipate a net loss of $1.10 a share on revenue of $2.1 billion. A year earlier, New York-based Aeropostale reported net income of 68 cents a share and total sales of $2.38 billion.

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TheStreet Ratings team rates AEROPOSTALE INC as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate AEROPOSTALE INC (ARO) a SELL. This is driven by a few notable weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity, poor profit margins and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • AEROPOSTALE INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, AEROPOSTALE INC reported lower earnings of $0.43 versus $0.86 in the prior year. For the next year, the market is expecting a contraction of 355.8% in earnings (-$1.10 versus $0.43).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Specialty Retail industry. The net income has significantly decreased by 202.7% when compared to the same quarter one year ago, falling from $24.95 million to -$25.62 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Specialty Retail industry and the overall market, AEROPOSTALE INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for AEROPOSTALE INC is rather low; currently it is at 20.17%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -4.97% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$8.54 million or 111.95% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

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