The teen clothing world is all about trends. Styles change constantly, and retailers have to adjust to keep up -- or, hopefully, set some of those trends. As the retailers' merchandise falls in and out of favor, the stock price typically follows suit, creating wild rides for brave investors. Aeropostale (NYSE:ARO) is no exception to this rule. Fortunately for the company and its shareholders, it just so happens to be a favorite destination among teens right now.
Aeropostale reported its fourth-quarter and full-year results March 15. (Warning: number dump ahead!) For the quarter, earnings jumped 37% to $57.3 million, or $1.08 per share. However, those numbers were inflated by vendor concessions; without them, earnings per share totaled $1.00, narrowly topping analyst estimates of $0.99 per share. For the year, earnings grew to $106.6 million, or $1.98 per share.
Beating estimates by just a penny obviously doesn't look so impressive on the surface. However, don't forget that the company provided original guidance of $0.91 to $0.93 per share. Just last month, Aeropostale increased those estimates, with analysts following right behind with their estimates. If they're based on what the company says, can they really be considered "estimates"?
Aeropostale's sales growth also looked quite impressive on the surface. For the fourth quarter, sales were up 16.5% to $506.8 million. However, same-store sales -- a better metric for retailers, because it shows sales at locations open for more than a year -- increased a less impressive 2.2% in the quarter. Annual results were similar, as overall sales jumped 17.4%, but comps grew by just 2%.
Looking ahead to 2007, Aeropostale has the confidence of a teenager. It's predicting EPS growth of 20%, and it's looking to open 85 new stores, including 10 in Canada, which would be its first venture north of the border. It also announced a $100 million increase in its share-buyback program, bringing the total to $350 million. It certainly has the capacity to accomplish this; Aeropostale has no debt and plenty of cash on hand.
While I don't doubt Aeropostale's ability to continue its growth through 2007, the stock is hardly on sale. It's priced just under its all-time high, and it's a bit more expensive than competitors American Eagle (NASDAQ:AEO) and Abercrombie & Fitch (NYSE:ANF). While I like the retailer's long-term prospects, I'd look to buy at times when it's briefly out of style.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article. The Fool has a disclosure policy.
