Looks like I have the honor of taking the Fool's first close look at teen casual apparel retailer Aeropostale (NYSE:ARO), shares of which have been on a heck of a run -- humiliating the S&P 500 -- over the last 12 months. That run continued today, with shares up almost 2% after the company reported remarkable January same-store sales growth of nearly 18% and strong fourth-quarter sales. It also raised its Q4 earnings guidance for the second time in two months.
Quarterly sales grew 32%, with same-store sales growth of 8%. (Last year's Q4 comps were just better than flat.) For the full year, net revenues improved more than 33% to $735 million, while same-store sales rose 6.6%. All those numbers beat company expectations. Now Aeropostale is saying the spring season, too, is off to a good start. Its outlook for Q4 earnings per share is in the range of $0.67 to $0.69, up from previous estimates of $0.66.
Much of the company's profit improvement can be chalked up to the expansion that is boosting sales. It's also worth noting, however, that through the first nine months of the fiscal year, gross margins improved year over year because of better selling prices in menswear, while SG&A expense as a percentage of revenues fell from year-ago figures. When added to top-line expansion, these two factors can create powerful leverage.
One development worth watching: When reporting Q3 numbers in November, Aeropostale said its board authorized a $35 million buyback program, calling it an "excellent means to return additional value to its shareholders." Investors will have to decide for themselves whether the company should be spending dollars on its increasingly rich shares rather than on expansion or marketing.
Sure, taking some shares off the market might help keep those EPS numbers growing, but the way the stores have been performing, they might not need the help. The marketplace is as competitive as ever -- ask Abercrombie & Fitch (NYSE:ANF) -- but in an environment where Gap (NYSE:GPS) is recovering strength and smaller mall-based retailers like Pacific Sunwear (NASDAQ:PSUN) are performing well, Aeropostale's numbers are impressive.
Talk about Aeropostale's stirring run over the last 12 months on our Aeropostale discussion board.
Dave Marino-Nachison can be reached via email.
