Why Aeropostale Shares Got Crushed

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen apparel retailer Aeropostale (NYSE: ARO  ) plummeted 32% today after its same-store sales and quarterly guidance disappointed Wall Street.

So what: Aeropostale shares have performed nicely over the past year, but downbeat guidance for the second quarter -- prompted by flat same-store sales -- is forcing Mr. Market to sober up considerably. In fact, the weak outlook comes just after close rival Abercrombie & Fitch (NYSE: ANF  ) also issued a disappointing full-year forecast, suggesting that the teen apparel space is becoming particularly susceptible to slowing consumer spending.

Now what: Management now expects to break even in the second quarter, down from its prior EPS view of $0.03-$0.05. "We are clearly disappointed that our second-quarter results fell below our initial expectations," CEO Thomas Johnson said. "While we delivered a more cohesive fashion offering and continued to improve our sales per transactions, our overall store traffic was weaker than anticipated." Of course, when you consider Aeropostale's single-digit forward P/E, much of that bad news might already be discounted into the shares.

Interested in more info on Aeropostale? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool owns shares of Aeropostale. Try any of our Foolish newsletter services free for 30 days.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 02, 2012, at 12:48 PM, FinallyIn wrote:

    Umm, I really don't see the why. Lower estimates and flat comps don't exactly explain a 32% plummet. Where's the analysis? If the bad news was already factored into the share price, why the sharp drop today?

  • Report this Comment On August 02, 2012, at 4:09 PM, Maui808Gal wrote:

    Uh..yes, I agree with FinallyIn, this article doesn't really address WHY the stock nose-dived...

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