This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Aeropostale Inc. (ARO) on March 13, 2008.
Management:
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Chairman and Chief Executive Officer: Julian Geiger
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President and Chief Merchandising Officer: Mindy Meads
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Vice President of Investor and Media Relations: Ken Ohashi
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Chief Financial Officer: Michael Cunningham
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Chief Operating Officer: Tom Johnson
Key Investor Issues:
- Net income was $63 million, or 93 cents per share, up 12.9% from the prior year period.
- Net sales were $591.3 million, up 16.7% from $506.8 million in 2006.
- The Company announced that it will be developing a new concept that will build on the its core competencies.
- The firm executed an accelerated share repurchase of $125 million or 4.8 million shares of its common stock.
Full Year Highlights:
- Net earnings was $129.2 million or $1.70 per share, a 21.2% increase from $106.6 million or $1.33 a share in the prior year.
- Sales increased 12.6% to $1.6 billion, from $1.4 billion in 2006 as same store sales were up 3.3%.
- The firm repurchased $266.5 million of common stock or 11.7 million shares and currently has $134 million remaining under the share repurchase program.
Fourth Quarter Highlights:
Sales were up 16.7% to $591.3 million, from $506.8 million in 2006 driven by the average square footage growth of about 12% and a 9% comparable which was partially offset by the impact of the calendar shift.
- Comparable transactions were up 5%, units per transactions were up 3% and average unit retail was up slightly as same store sales increased 9.2%
- The firm opened five Aero stores ending with a total of 802 Aero stores in US, 12 stores in Canada and 144 Jimmy''Z stores.
- Gross margins for the quarter were 37.8% versus 37.2% last year, with the 120 base point increase driven primarily by an increase in merchandise margins.
SG&A at $118 million was 19.8% of sales from $97 million or 19.2% last year driven primarily by increases in RE companies reflecting the doubling of sales, increase in store line expenses and higher incentive and stock-based compensation.
- SG&A expenses were partially offset by a 50 basis points leverage of marketing and fixed corporate expenses.
- A total of $9 million asset impairment charges were recorded related to the Jimmy''Z concept.
- The Jimmy''s loss was 2 cents per share compared to 3 cents loss last year.
Cash and cash equivalents together with short term securities were $111.9 million down from $276.2 million in the prior year attributable to increased stock repurchases and increased capital expenditures.
- The firm repurchased $4.8 million shares of stock for approximately $125 million.
- As of February 2, 2008 approximately $134 million was remaining of the buy back under the $600 million share repurchase program.
- Inventories closed at $136.5 million, up 34.5 % and on a per square foot basis inventory was up 20% reflecting the accelerating receipts due to a shift in process.
- Capital expenditures were $10.3 million and depreciation and amortization was $11.2 million.
- The company will be developing a new concept that will build on its core competencies, while targeting a younger demographic than the Aeropostale customer, and this will be launched during fiscal 2009.
Fiscal 2008 Outlook
- First quarter EPS expected to be in a range of 20 cents to 22 cents per diluted share.
- For the full year 2008 the firm expects to open 85 new stores and achieve EPS growth of 18% compared to fiscal 2007 net earnings of $1.70 per share.
- The firm intends to open approximately 85 Aeropostale stores and plans to invest $76.0 million in capital expenditures.
Key questions and answers from the fourth quarter fiscal 2007 earnings call conducted by Aeropostale on March 13, 2008
Brad Stephens (Morgan Keegan):
In your denim business, any changes that you see going on as we head into the back-to-school period?
Mindy Meads: Actually we had a very strong denim business in February particularly in men''s, women''s was on plan. Last year we did not have a lot of denim in first quarter. So we are very pleased with the level. It will then go down in second quarter and build back up for back-to-school.
Brad Stephens (Morgan Keegan):
Do you see anything changing on the styling?
Mindy Meads: The styling is pretty similar. Probably the changes are more in washes and we continue just to fine tune which style the customer has preference, whether it is getting flare, a straighter leg, but at this point, it is really a balance of having the right washes.
Christine Chen (Needham & Company):
How much are you using Jimmy''Z for trend-spotting for fashion at Aero?
