This is a summary of the second quarter fiscal 2008 earnings call conducted by Aeropostale, Inc. (ARO) on August 21, 2008.
Management:
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Chairman and CEO: Julian Geiger
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President and Chief Merchandising Officer: Mindy Meads
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EVP and CFO: Michael Cunningham
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EVP and COO: Tom Johnson
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VP, Investor & Media Relations: Kenneth Ohashi
Key Investor Issues:
- Net earnings per share grew 63% to $0.31 per share from $0.19 per share last year.
- Net sales for the quarter increased 21% to $377 million and the company generated a same-store sales increase of 11%.
- Aeropostale increased gross profit by 230 basis points and operating margins improved by 220 points. Gross margin jumped to 33.4% from 31.1% a year ago.
- Aeropostale forecasted fiscal third-quarter earnings of 59 cents to 61 cents a share.
Second Quarter Highlights:
Aeropostale ended the quarter with a strong start to the back to school selling season. The strategic initiatives that the company has outlined have been implementing over the past few years are having a substantial and positive impact on the business.
The company is pleased with the customer response to the summer and early back to school assortments as Aeropostale continues to build on its successes from the first quarter. The company’s merchandising successes have been a result of the focus on one, giving the customer an added assortment, the right colors, patterns and detailing the classifications they want.
Women''s comps were up in the high single digit, while men''s comps were up in mid teens.
While Aeropostale experienced broad-based strength across all categories it saw particular strength in women''s and men''s graphics, denim for both genders, women''s bare knit tops and men''s Polo.
During the quarter, Aeropostale continues to see positive traffic in its stores with comp transactions up in the high single digit and units per transaction as well as average unit retail were both up in the low single digit.
The company experienced consistent strength across all geographic regions.
As a result of higher initial sell-throughs the inventories remain very current. The company is comfortable with both the level and the composition of inventories as heading into the remainder of the year.
Total net sales for the quarter were up 21% versus last year driven by average square footage growth of 5.11% and 11% comps.
During the quarter, Aeropostale opened 31 stores ending with a total of 843 Aero stores in the U.S., 22 stores in Canada, and 14 Jimmy''Z stores.
Gross margins for the quarter were 33.4% versus 31.1% last year.
The 230 basis point increase was primarily driven by higher merchandise margins. SG&A for the quarter was 24% of sales versus 23.9% last year. While Aeropostale leverages store line and corporate expenses of approximately 110 basis points this is offset by an 80 basis point increase in incentive comp as a result of the company significantly exceeding its operating plan and a 40 basis point increase in stock-based compensation.
The tax rate for the quarter was 40.5% which resulted in net income of $21.1 million or $0.31 per share.
- Cash and cash equivalents were $70.8 million versus cash and cash equivalents together with short-term security of $204 million last year.
- The $103 million decrease over last year is due to increased repurchase activity during second half of 2007.
During the quarter Aeropostale repurchased 93,000 shares of its stock for approximately $2.9 million.
- As of August 2nd 2008, Aeropostale had approximately $131million of remaining buy back availability.
- Inventory at the close of the quarter was $183.7 million and were up 22% in total.
