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Aeropostale beats analysts, grows earnings and comps, but stock still sells off ... why?

Posted Mar 13th 2009 4:30PM by Steven MallasSteven Mallas RSS Feed
Filed under: Earnings reports

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Mall retailers have been struggling, but Aeropostale (NYSE: ARO), whose colleagues include Gap (NYSE: GPS), Abercrombie & Fitch (NYSE: ANF), and American Eagle Outfitters (NYSE: AEO), actually posted a pretty decent earnings report on Thursday after the bell. For the fourth quarter, Aeropostale earned $1.01 per share. That performance represented a 6% growth rate, and it beat analyst estimates by the proverbial penny.
But wait, there's more. Total sales for Q4 increased 17%, and same-store sales jumped 6%. I find the same-store sales statistic quite impressive given the repulsive holiday season we went through. Consumer confidence was terrible, so growing comps in this environment is notable. Apparently, Aeropostale had the stuff that its target demo wanted. That's a cool accomplishment, given that it's very difficult to stay on the good side of an inherently fickle audience. As we all know, the youth's opinions on fashion change as often as the weather does in the Northeast. So, you've got to give management credit here. They did a good job keeping Aeropostale running smoothly and effectively during the recession. However, at the time of this writing, the stock was down over 1.7% to $24.69. Furthermore, it had actually hit an intraday low of $24 at the opening of the day's trading.

Why the sell-off on such positive news? Well, I agree with a reason presented by this source. Profit-taking. Aeropostale has been a very strong stock during the bear market. At some point, you want to book gains. After all, Aeropostale is performing now, but when will it suddenly not perform? Like I said, the youth can be fickle. If you're a shareholder who bought Aeropostale a few months ago and are now sitting on a nice paper profit, it would be completely understandable on your part if you wanted to take some money off the table. Aeropostale might do well over the long term, but with consumers still hurting, and with jobs still a big issue for the markets, I'd say that capturing a little capital appreciation might be the smart thing to do here, as earnings growth could conceivably slow for Aeropostale.

Disclosure: I don't own any company mentioned; positions can change without notice.

Tags: abercrombie and fitch, AbercrombieAndFitch, AEO, aeropostale, american eagle outfitters, AmericanEagleOutfitters, ANF, ARO, fashion, Gap, GPS, inthenews, retail

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Last updated: November 24, 2009: 12:32 PM

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