It doesn't seem to matter that the word Aeropostale (NYSE:ARO) is a challenge to pronounce, not to mention spell. Its product line and brand have really made some cool points with kids, judging by the company's fiscal first-quarter earnings, announced last night after market close.
Aeropostale's first-quarter net income rocketed 196.4% higher at $6.3 million, or $0.11 per share. Net sales were blisteringly hot, up 49.4% at $167.7 million, while same-store sales increased a solid 18.9%. Gross margin increased to 29.3% from 27%, a 230 basis-point improvement.
Based on the strong results, Aeropostale apparently expects the momentum to continue, as it raised its second-quarter earnings estimate to $0.11 per share from $0.07 per share.
Though Aeropostale touts its target demographic as 11- to 20-year-olds, the Aeropostale discussion board recently included some anecdotal evidence that maybe the store's got some great buzz with the slightly younger 10-year-old set -- to the point where maybe the little tykes see it as a status store, where some degree of peer pressure is influencing sales.
Other companies that cater to the pre-teen set -- also known as 'tweens, a term I love to throw around whenever given half a chance -- include female-focused Too (NYSE:TOO), as well as Abercrombie & Fitch's (NYSE:ANF) Hollister concept. Indeed, while Abercrombie has had some problems drawing a crowd, Hollister was popular enough to offset some of the damage to its other concepts.
Some of the excitement for Aeropostale is related to the success of its continuing growth. Indeed, the company, which ultimately plans to have 900 stores, is on the brink of opening up its 500th store next week, according to the conference call transcript available at CCBN StreetEvents. However, it's not like we haven't seen signs of success before now.
Recent trading of Aeropostale shares revealed a 3% uptick in stock price, just a tad shy of its 52-week high. It's also trading at 20 times forward earnings; despite the high-flying growth in sales and earnings, it seems there could be a better time to buy into its popularity.
Alyce Lomax does not own shares in any of the companies mentioned. If you're wondering about Aeropostale's name, rewind to the 1920s. Compagnie Generale Aeropostale is described by the company's website as the first airmail concern to ever fly between South America and France.
