Aeropostale (ARO ) cut second-quarter earnings per share guidance. Brean Murray downgraded the stock to hold from strong buy.
Analyst Eric Beder says July same-store sales were worse than even the lowest analyst estimate and were a material miss from overly optimistic projections. While denim was not a problem, he thinks poor results from initial back-to-school offerings put the prospect for a sustained turnaround, even with easier comps, in jeopardy.
Therefore, Beder slashes $1.84 fiscal year 2006 (January) EPS estimate to $1.65, and $2.26 for fiscal year 2007 to $2.00.
He now believes Aeropostale will, at best, be in a penalty box with investors until there is tangible proof of a material turnaround. Given limited visibility, he downgraded the stock.