Mr. Market is always good for a laugh. Today, shares of Aeropostale (NYSE:ARO) took off, though I don't think the company deserves it. (And hey, I'm a shareholder.) In fact, after yesterday's numbers, I thought it deserved a bit more of a spanking.

Sure, revenues of $233 million were close to analysts' expectations, and earnings "made" the estimates, but that's hardly saying much for the aspiring teen hottie. In fact, its $0.13-per-share earnings were a 32% drop from last year.

The problem was simple. As opposed to peers and competitors such as American Eagle Outfitters (NASDAQ:AEOS), Abercrombie & Fitch (NYSE:ANF), and Guess? (NYSE:GES), shoppers seem to have cooled on the stuff Aeropostale is shoveling. Same-store sales declined 2.2%, even as price drops lowered gross margins by nearly four percentage points.

What's worse to me is the bloat on the balance sheet. Inventories climbed 64%, or 34% on a square-footage basis, according to the conference call. At least the firm was pretty straightforward about things, saying, "We are clearly disappointed with our performance for the second quarter." More straight talk indicates that there will further "promotional activity" coming to help reduce inventory. Contrary to what the Wise have been predicting for months now, management says that denim sales are hardly fading. Instead, sales are so strong that they're actually cannibalizing on other products, which has contributed to Aeropostale's recent problems.

Besides an admirable ability to admit mistakes, Aeropostale's best assets (and why I hold the stock, and will continue to do so) are a track record of good operating efficiency and the ability to generate strong cash flow. Since the tight-lipped crew doesn't provide full cash flow data on the release -- c'mon, folks, how hard would that be? -- I don't have the full picture. It's worth noting, however, that the balance sheet shows cash and short-term investments of $142 million, a 45.9% jump over last year's total.

In other words, this is a tennis ball, not an egg. And unless the firm really screws up the next couple of quarters, investors may look back to see that the current, languishing stock price was a decent opportunity to collect a few shares.

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At the time of publication, Seth Jayson had shares of American Eagle, Guess?, and Aeropostale. Fool rules are here.