Topic: How To Invest

Stock trading: Rising costs hurt Aeropostale earnings

Aeropostale Inc., symbol ARO on New York, is a mall-based retailer of casual clothing and accessories. The company has 974 Aeropostale stores in the U.S., Canada and Puerto Rico. It mainly sells its clothing to 14-to-17-year-olds. Aeropostale’s 57 “P.S. from Aeropostale” stores in the U.S. are aimed at seven-to-12-year-old elementary-school children.

We analyze Aeropostale in Stock Pickers Digest, our newsletter for aggressive stock trading.

In the three months ended April 30, 2011, Aeropostale’s sales rose 1.2%, to $469.2 million from $463.6 million. Same-store sales declined 7%, compared with an increase of 8% a year earlier. Sales from the company’s e-commerce business jumped 18.5%, to $28.2 million from $23.8 million.

Despite the higher sales, Aeropostale’s earnings dropped 63.9%, to $16.4 million from $45.4 million a year earlier. During the quarter, the company bought back 4.2 million of its shares for $100.1 million. Due to fewer shares outstanding, the stock trading pick’s earnings per share fell 58.3%, to $0.20 from $0.48.

The company’s costs rose sharply in the latest quarter, especially for clothing, due to a sharp rise in the price of cotton. Aeropostale also had to offer big discounts to clear spring inventory to position itself for the key back-to-school shopping season.

We updated our stock trading advice on Aeropostale in our May 27, 2011 Stock Pickers Digest hotline, which you can immediately view when you take a 1-month free trial to Stock Pickers Digest. Click here to get started right away.

(Note: If you are a current Stock Pickers Digest subscriber, please click here to view Pat’s recommendation. Be sure to log in first.)

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