This is a summary of the fourth quarter fiscal 2008 earnings call conducted by Aeropostale Inc. (ARO) on March 12, 2009.
Management:
-
Chairman and CEO: Julian Geiger
-
President and Chief Merchandising Officer: Mindy Meads
-
CFO: Michael Cunningham
-
COO: Tom Johnson
-
VP of Investor & Media Relations: Ken Ohashi
Key Investor Issues:
- Profit for the quarter rose to $68.2 million, or $1.01 per share, from $64.7 million, or 95 cents per share, a year ago.
- For the year, profit rose 16% to $149.4 million, or $2.21 per share.
- Sales jumped 19% to $1.89 billion from $1.59 billion.
- The company issued first-quarter guidance of 25 cents to 27 cents per share, excluding charges.
Fourth Quarter Highlights:
- During Q4 net sales increased 17% to $690 million and same-store sales increased 6% compared to a 9% increased last year.
- Total net sales from the e-commerce business increased 88% to $41 million and earnings per share grew 6% to a record $1.01 per share from $0.95 per share last year.
- For the full year, net sales increased 19% to almost $1.9 billion.
- Total net sales from the e-commerce business increased 85% to $79 million.
- Same-store sales for the year increased 8% compared to a 3% increase last year.
Marking the 11 consecutive year of positive same-store sales and earnings per share reached $2.21, a 28% increased over earnings of $1.73 per share last year.
For the fourth quarter, Aeropostale experienced strength in both genders with women’s comp was up mid-single digit and men’s continued in high single-digit. Units per transactions were up in low single digit and comp transactions were up in the mid single, significantly above mall traffic trend. Aeropostale continues to be encouraged by the trend in the average unit retail, which was flat for Q4 and up for both January and February.
Inventory ended the season was down 17% per square foot at the end of the fourth quarter due to stronger than expected sell-throughs in the holiday season and a slight shift in the timing of the spring to floor set.
Total net sales for the quarter were up 17% driven by a 12% increase in square footage, coupled with our 6% comp.
- During the quarter, the company opened 12 stores ending with a total of 903 Aero stores.
- Gross margins for the quarter were 35.3%, versus 37.8% last year.
- Gross margin last year included an 80 basis point benefit due to the initial recognition of gift card breakage income of $7.7 million. The remaining 170 basis point decline is primarily due to a decrease in the merchandise margins.
SG&A for the quarter was 18.8% of sales versus 19.8% last year, 20 basis points pertained to the previously mentioned initial gift card breakage, including sales and gross margin last year. Accordingly, the remaining 120 basis point decline in SG&A for the quarter reflect 90 basis point of store line related expense leverage and a 40 basis point decline in incentive compensation expense. Partially offset by a 20 basis point increase in e-com fees related to the 88% growth in sales for that business.
Tax rate for the quarter was 39.9%, which resulted in net income of $68.2 million or $1.01 per share.
Cash and cash equivalent together with short term securities at the close of the quarter were $228.5 million versus $111.9 million last year. Aeropostale has no auction rate securities and has no borrowings under our $150 million credit facility. The liquidity reflects over $115 million in free cash flow generated during the year.
Inventory at the close of the quarter was $126.4 million and was down 7% in total. On a per square foot basis, inventory was down 17%, it reflects the decrease due to the stronger than expected sell-throughs as well as the shift and timing of the floor-sets.
CapEx for the quarter was $10.6 million and depreciation and amortization was $15.2 million.
For the full year 2009, Aeropostale expects to open a total of 15 new stores, 40 Aero and 10 stores in its new concept. The company plans on remodeling 20 stores with a total 2009 CapEx projected at $55 million.
The guidance for the first quarter for EPS is a range of $0.22 to $0.24 per diluted share, which includes $3 million or $0.03 of onetime closing costs related to Jimmy’Z.
The company expects to incur an additional $2 million or $0.02 of EPS cost for Jimmy’Z’s in the second quarter of this year.
