Aeropostale (NYSE: ARO), a retailer that competes with Abercrombie & Fitch (NYSE: ANF), American Eagle Outfitters (NYSE: AEO), and Gap (NYSE: GPS), posted what I thought was a superb second-quarter earnings summary on Thursday after the bell. The figures were very appealing, and I would've expected a better after-hours reaction by the stock to the news. Then again, the market can never be predicted. It will do whatever the heck it wants.
Net sales increased 20%. Not bad, am I right? Wait, check this out. Earnings per share came in at 57 cents, compared to the 31 cents reported in the year-ago quarter. According to Reuters, that was a penny ahead of expectations. But that penny beat on the bottom line isn't what impresses me the most. It's the strong per-share profit expansion that I find compelling.
Oh, and are you ready for an awesome same-store sales reading for a change? Some retailers are having problems in this area, but not Aeropostale. Comps increased 12%. Double-digit comps during such a tumultuous financial time period? I'll take them!
Now, Aeropostale's stock was up 0.5% during yesterday's after-hours session. Come on, shareholders deserved better than that! I've seen retailers in worse situations rally on horrible data. Reuters mentioned that the top line came in slightly under expectations, and that this might have been the reason behind the lackluster response from Wall Street traders. Uh, I thought the sales were actually quite good myself. But, whatever, you know?
I think the fundamentals with this company are stellar (and shares did perk up nicely in this morning's trading), but I do concede a powerful underlying risk to the story: can management keep the momentum going? Nothing comes easy, especially creating shareholder value by exploiting the fashion sensibilities of the fickle teenage mall demographic.
Nevertheless, Aeropostale is one of the better mall retailers out there, and it could be a buy. Take a look at it, especially over the next few sessions. If it sells off by any chance, I'd say it should be considered. This was definitely one of the more enjoyable earnings reports I've read in the last month or so.
Disclosure: I don't own any company mentioned; positions can change without notice.
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