UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number: 001-31314

AÉROPOSTALE, INC.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code:

(646) 485-5398

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to the filing requirements for at least the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ          No o

      The aggregate market value of voting stock held by non-affiliates of the registrant as of July 31, 2004 was $1,711,070,116.

      55,485,504 shares of Common Stock were outstanding at March 16, 2005.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant’s definitive Proxy Statement, to be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year covered by this Annual Report on Form 10-K, with respect to the Annual Meeting of Stockholders to be held on June 15, 2005, are incorporated by reference into Part III of this Annual Report on Form 10-K. This report consists of 49 sequentially numbered pages. The Exhibit Index is located at sequentially numbered page 46.

AÉROPOSTALE, INC.

TABLE OF CONTENTS

      As used in this Annual Report on Form 10-K, unless the context otherwise requires, all references to “we”, “us”, “our”, “Aéropostale” or the “Company” refer to Aéropostale, Inc., and its subsidiaries. The term “common stock” means our common stock, $.01 par value. Our website is located at www.aeropostale.com (this and any other references in this Annual Report on Form 10-K to Aéropostale.com is solely a reference to a uniform resource locator, or URL, and is an inactive textual reference only, not intended to incorporate the website into this Annual Report on Form 10-K). On our website, we make available, as soon as reasonably practicable after electronic filing with the Securities and Exchange Commission, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and any amendments to those reports. All of these reports are provided to the public free of charge.

PART I

Overview

      Aéropostale, Inc., a Delaware corporation, is a fast growing, mall-based, specialty retailer of casual apparel and accessories. We design, market and sell our own brand of merchandise principally targeting 11 to 18 year-old young women and young men. We provide our customers with a focused selection of high-quality, active-oriented, fashion basic merchandise at compelling values. We maintain control over our proprietary brands by designing and sourcing all of our merchandise. Our products are sold only at our stores or at organized sales events at college campuses. Starting this summer, we anticipate that we will also be selling our products on-line through our website www.aeropostale.com.

      We strive to create a fun high energy shopping experience through the use of creative visual merchandising, colorful in-store signage, bright lighting, popular music and an enthusiastic well-trained sales force. Our average store size of approximately 3,500 square feet is generally smaller than that of our mall-based competitors and we believe that this enables us to achieve higher sales productivity and project a sense of action and excitement. We operated 561 stores in 43 states as of January 29, 2005.

      The Aéropostale brand was established by R.H. Macy & Co., Inc. as a department store private label initiative in the early 1980’s targeting men in their twenties. As a result of the label’s initial success, Macy’s opened the first mall-based Aéropostale specialty store in 1987. Over the next decade, Macy’s, and then Federated Department Stores, Inc., its current parent company, continued new store expansion and opened over 100 stores. In August 1998, Federated sold its specialty store division to our management team and Bear Stearns Merchant Banking.

      Our fiscal year ends on the Saturday nearest to January 31. Fiscal 2004 was the 52-week period ended January 29, 2005, fiscal 2003 was the 52-week period ended January 31, 2004, and fiscal 2002 was the 52-week period ended February 1, 2003. Fiscal 2005 will be the 52-week period ending January 28, 2006.

      On April 26, 2004, we completed a three-for-two stock split on all shares of our common stock that was affected in the form of a stock dividend. All prior period share and per share amounts presented in this report have been restated to give retroactive recognition to the common stock split.

Growth Strategy

      Continue to open new Aéropostale stores. We consider our merchandise and our stores as having broad national appeal that continues to provide substantial new store expansion opportunities. We have opened a total of 291 new Aéropostale stores during the last three fiscal years. We plan to open approximately 100 new Aéropostale stores in fiscal 2005. We plan to open stores both in markets where we currently operate and in new markets.

      Enhance and expand our brand. We seek to capitalize on the success of our core Aéropostale brand, while continuing to enhance our brand recognition through external as well as in-store marketing initiatives.

We expect that as our brand continues to gain increased awareness and greater overall recognition, our stores will continue to be preferred shopping destinations.

      Continue high levels of store productivity. We seek to produce comparable store sales growth and increased average sales per square foot. We expect to continue employing our promotional pricing strategies in order to maintain high levels of customer traffic. We will also continue testing our products with our core demographics, so that we can identify and capitalize upon developing trends and continue to evolve with the changing tastes of our customers.

      Jimmy’Z. In June 2004, we acquired the rights to and existing registrations for the JIMMY’Z® and Woody Car Design brand and trademarks in the United States and Canada for clothing and related goods and services. We will be launching this new Jimmy’Z brand concept during the second half of fiscal 2005. Jimmy’Z will be geared as a California lifestyle-oriented brand, targeting trend-aware young men and women aged 18-25. Merchandise sold at Jimmy’Z stores will be at initial price points higher than merchandise sold at our Aéropostale stores. We anticipate opening approximately 14 Jimmy’Z stores in various geographic regions during fiscal 2005. These stores will be approximately 3,500 square feet. Jimmy’Z Surf Co., Inc. is a wholly owned subsidiary of Aéropostale, Inc.

      E-Commerce. We will also be launching our e-commerce business in the second half of fiscal 2005. The Aéropostale Web store will be accessible at our web site, www.aeropostale.com. A third party who will, among other things, warehouse our inventory and fulfill our sales orders, will operate our e-commerce business. We will purchase, manage and own the inventory sold through our Web site and we will recognize revenue from the sale of these products when the customer receives the merchandise.

Stores

      Existing stores. As of January 29, 2005, we operated 561 stores in the following 43 states. We strive to locate our stores in regional shopping malls, in geographic areas with high concentrations of our target customers:

      The following table highlights the number of stores opened and closed since the beginning of fiscal 2002:

      Store design and environment. We design our stores in an effort to create an energetic shopping environment, featuring powerful in-store promotional signage, creative visuals, bright lighting and popular music. The enthusiasm of our associates is integral to our store environment. Our stores feature display windows that provide high visibility for mall traffic. The front of our stores generally feature the newest, and what we anticipate to be the most desirable, of our merchandise offerings at that time, in an effort to draw shoppers into the store. Our strategy is to create fresh and exciting merchandise assortments by updating our floor sets numerous times throughout the year. Visual merchandising directives are initiated at the corporate level, seeking to maintain consistency throughout all of our stores. We generally locate our stores in central mall locations near popular teen gathering spots, including food courts, music stores and other teen-oriented retailers.

      Our stores average approximately 3,500 square feet, and range in size from 2,500 to 6,000 square feet. We believe that by keeping our store size generally smaller than that of many of our competitors, we are able to achieve a higher level of productivity and help reinforce the sense of activity and energy that we want our stores to project. In addition, we generally implement renovations at the time of expiration of that store’s lease.

      Store management. Our stores are organized into two zones and within each zone by region and further into districts. Each of the zones is managed by a Zone Vice President and encompasses 4 regions. A regional manager manages each of our 8 regions and each region encompasses approximately 8 to 10 districts. Each district is managed by a district manager and encompasses approximately 7 to 10 individual stores. We typically staff each store with one store manager, two assistant managers and 10 to 15 part-time sales associates, the number of which generally increases during our peak selling seasons. Store managers are responsible for the operations of the store including executing guidelines for merchandise presentation and maintenance, scheduling, hiring and training of sales associates. Store managers also provide the leadership and direction of the selling effort. Our corporate headquarters directs the merchandise assortments, store layout, inventory management and in-store visuals for our stores.

      Expansion opportunities and site selection. Over the past three years, we have focused on opening new stores in an effort to penetrate existing markets as well as enter new markets. We plan to continue to increase our store base during fiscal 2005 by opening approximately 114 new stores, including approximately 14 Jimmy’Z stores (see the section “Growth Strategy” above).

      In selecting a specific site, we generally target high traffic locations in malls with suitable demographics and favorable lease economics. As a result, we tend to locate our stores in malls in which comparable teen-oriented retailers have performed well. A primary site evaluation criterion includes average sales per square foot, co-tenancies, traffic patterns and occupancy costs.

      We have implemented our store format across a wide variety of mall classifications and geographic locations. For new stores opened in fiscal 2003 and fiscal 2002, our average net investment has been approximately $229,000 per store location, which includes capital expenditures adjusted for landlord contributions and initial inventory at cost net of payables. Those of our stores which were opened in fiscal 2003 and fiscal 2002 achieved, during their first twelve months of operations, average net sales of approximately $1.6 million and sales per square selling foot of $470. These amounts exclude certain outlet locations that are not considered profit centers and are utilized primarily to sell end of season merchandise.

Pricing

      We believe that a key component of our success is our ability to understand what our customers want and what they can afford. Our merchandise, which we believe is of comparable quality to that of our primary competitors, is generally priced lower than our competitor’s merchandise. Most of our products range in ticket price from approximately $10.00 to $44.50 per item. We use a demand-driven promotional pricing strategy to emphasize the value we offer relative to our competitors and to encourage our customers to continue returning to our stores. We conduct promotional offers throughout the year, with a majority of the merchandise selection in our stores being subject to a promotion at any given time. Each promotion typically lasts for approximately two to four weeks, depending on the demand for the product.

Design and Merchandising

      Our design and merchandising teams each focus on designing merchandise that meets the demands of our core customers’ lifestyles. We maintain a separate, dedicated, design and merchandising group for each of our young women’s, young men’s and accessories product lines. A merchandising manager who oversees each product line ensures consistency of our products with the desires of our customers.

      Design. We offer a focused collection of fashion basic apparel, including graphic t-shirts, tops, bottoms, sweaters, jeans, outerwear and accessories. Our “design-driven, merchant-modified” philosophy, in which our designers’ visions are refined by our merchants’ understanding of the current market for our products, helps to ensure that our merchandise styles reflect the latest trends while not becoming too fashion forward for our customers’ tastes. Much of our merchandise features our “Aéropostale” or “Aéro” logo. We believe that our logo apparel appeals to our young customers and reinforces our brand image.

      We strive to achieve a disciplined design process, which we consider enables us to develop the right merchandise for our customers, while offering a consistent product assortment throughout a season. The product development process begins with our designers, merchandisers and senior management working together to review the prior season’s results, new fashion trends and to consider the classifications and styles that we should develop for the upcoming season.

      Merchandising. Our merchandise planning organization determines the quantities of units needed for each product category. By monitoring sales of each style and color and employing our flexible sourcing capabilities, we are able to adjust our merchandise assortments to capitalize upon emerging trends.

      The following chart provides a historical breakdown of our percentages of sales by category:

Sourcing

      We seek to employ a sourcing strategy that expedites our speed to market and allows us to respond quickly to our customers’ preferences. We believe that we have developed strong relationships with our vendors, some of who rely upon us for a significant portion of their overall business. The majority of our

vendors can respond to orders quickly. We monitor the quality of our vendors’ products by inspecting pre-production samples, arranging for periodic site visits to vendors’ foreign production factories and by selectively inspecting inbound product shipments at our distribution center.

      During fiscal 2004, we sourced approximately 35% of our merchandise from our top three vendors and approximately 68% from our top ten vendors. In addition, one company acted as our agent in sourcing 21% of our total merchandise. Most of our vendors maintain sourcing offices in the United States, with the majority of their production factories located in Europe, Asia and Central America. In an effort to minimize currency risk, all payments to our vendors and sourcing agents are made in U.S. dollars. We engage a third party independent contractor to visit the production facilities we receive our products from. This independent contractor assesses the compliance of the facility with, among other things, local and United States labor laws and regulations as well as fair trade and business practices.

Marketing and Advertising

      We use numerous initiatives to maximize the impact of our marketing and advertising programs. We view the enthusiasm and commitment of our store-level employees as a key element to establishing the credibility of our brand with our target customers. We view the use of our logo on our merchandise as a means for increasing our brand awareness and visibility among our target customers.

      Over the past few years, we have developed a marketing program that allows us to gain additional exposure for our brand on college campuses. We believe that our target customers value and aspire to an active, collegiate lifestyle. Accordingly, we sponsor a number of collegiate athletic conference tournaments by providing co-branded apparel and donating various scholarships. In addition, we have entered into agreements with numerous colleges and universities that enable us to sell and market our products on campuses through organized sales events. We have historically relied on these methods as effective advertising tools and have utilized traditional media advertising on a very limited basis. In addition, we will be launching our e-commerce business in the second half of fiscal 2005. The Aéropostale Web store will be accessible at our web site, www.aeropostale.com. See the section “Growth Strategy” for a further discussion.

Distribution

      We lease a 315,000 square foot distribution facility in South River, New Jersey, to process merchandise and to warehouse inventory needed to replenish our stores. The timely and efficient replenishment of our merchandise is key to our overall business strategy. We continue to invest in systems and automation to improve processing efficiencies and to support our store growth. Our distribution center uses automated sortation materials handling equipment to receive, process and ship to our stores. Our distribution center services all of our Aéropostale stores, and will also support our new Jimmy’Z stores beginning in fiscal 2005. This facility also serves our other warehousing needs, such as storage of new store merchandise, floor set merchandise and packaging supplies. The distribution center is currently equipped to process merchandise for over 800 stores. On January 24, 2005 we received notice from the sub-landlord of our distribution and warehouse facility that they have elected not to exercise their renewal option to continue leasing the facility from the landlord. We have reached an agreement in principle with the landlord on terms of a long-term lease for the facility directly with them. We are in the process of drafting definitive documentation with the landlord regarding a long-term lease.

      The staffing and management of the distribution facility is outsourced to a third party provider that operates the distribution facility and processes our merchandise. This third party provider employs personnel represented by a labor union. There have been no work stoppages or disruptions since the inception of our relationship with this third party provider in 1991, and we believe that the third party provider has a good relationship with its employees.

Information Systems

      Our management information systems provide a full range of retail, financial and merchandising applications. We utilize industry software systems to provide various functions related to:

      We continue to invest in technology to align our technology with the business in support of our rapid growth. In the past year we focused on key aspects of critical infrastructure requirements that will continue in the future. These infrastructure requirements will include support for the opening of the Jimmy’Z stores in fiscal 2005, as discussed in the section “New Business Opportunities” discussed above.

Trademarks

      We have registered the AÉROPOSTALE® trademark and stylized design with the U.S. Patent and Trademark Office as a trademark for clothing and for a variety of accessories, including sunglasses, belts, socks and hats, and as a service mark for retail clothing stores. We have also registered the AÉRO^tm stylized design mark with the U.S. Patent and Trademark Office as a trademark for clothing and a further filing for AERO HOUSE^sm for online services is pending. Additionally, we have applied for or have obtained a registration for the AÉROPOSTALE mark in over 26 foreign countries where we obtain supplies, manufacture goods or have the potential of doing so in the future.

      In June 2004, we acquired the rights to and existing registrations for the JIMMY’Z® and Woody Car Design brand and marks in the United States and Canada for clothing and related goods and services. We have also made further filings for the JIMMY’Z and Woody Car Design marks which are pending.

Competition

      The teen apparel market is highly competitive. We compete with a wide variety of retailers including other specialty stores, department stores, mail order retailers and mass merchandisers. Specifically, we compete with other teen apparel retailers including, but not limited to, American Eagle Outfitters, Hollister, Hot Topic, Old Navy, Pacific Sunwear, and Too. Stores in our sector compete primarily on the basis of design, price, quality, service and selection. We believe that our competitive advantage lies with our differentiated brand and our unique combination of quality, comfort and value. Moreover, we believe that we target a younger, value-oriented customer, while many of our competitors cater to a customer who is either older or seeking cutting-edge fashion.

      Many of our competitors are considerably larger and have substantially greater financing, marketing, and other resources. We cannot assure you that we will be able to compete successfully with them in the future, particularly in geographic locations that represent new markets for us.

Employees

      As of January 29, 2005, we employed 2,215 full-time and 6,269 part-time employees. We employed 205 of our employees at our corporate offices, and 8,279 at our store locations. The number of part-time employees fluctuates depending on our seasonal needs. None of our employees are represented by a labor union and we consider our relationship with our employees to be good.

Seasonality

      Our business is highly seasonal, and historically we have realized a significant portion of our sales, net income and cash flows in the second half of the year, driven by the impact of the back-to-school selling season in the third quarter, and the holiday selling season in the fourth quarter. Additionally, working capital requirements fluctuate during the year, increasing in mid-summer in anticipation of the third and fourth quarters.

Available Information

      We maintain an internet Web site, www.aeropostale.com, through which access is available to our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments of these reports filed, or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, after they are filed with or furnished to the Securities and Exchange Commission.

      Our Corporate Governance Guidelines and the charters for our Audit Committee, Corporate Governance and Nominating Committee and Compensation Committee may also be found on our internet Web site at www.aeropostale.com. In addition, our Web site contains our Code of Business Conduct and Ethics, which is our code of ethics and conduct for our directors, officers and employees. Any waivers to our Code of Business Conduct and Ethics will be promptly disclosed on our web site.

Cautionary Note Regarding Forward-Looking Statements and Risk Factors

      This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve certain risks and uncertainties, including statements regarding the company’s strategic direction, prospects and future results. Certain factors, including factors outside of our control, may cause actual results to differ materially from those contained in the forward-looking statements. The following risk factors should be read in connection with evaluating the Company’s business and future prospects. All forward looking statements included in this report are based on information available to us as of the date hereof, and we assume no obligation to update or revise such forward-looking statements to reflect events or circumstances that occur after such statements are made. Such uncertainties include, among others, the following factors:

      Our comparable store sales and quarterly results of operations have fluctuated in the past and are likely to continue to fluctuate in the future. In addition, there can be no assurance that we will be able to maintain our recent levels of comparable store sales as our business continues to expand. Our comparable store sales and quarterly results of operations are affected by a variety of factors, including:

      If our future comparable store sales fail to meet the expectations of investors, then the market price of our common stock could decline substantially. You should refer to the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.

      We do not own or operate any manufacturing facilities and therefore we depend upon independent third parties for the manufacture of all of our merchandise. We utilize both domestic and international manufacturers to produce our merchandise. The inability of a manufacturer to ship orders in a timely manner or meet our quality standards could cause delivery date requirements to be missed, which could result in lost sales.

      Our sourcing agents and independent manufacturers are required to operate in compliance with all applicable foreign and domestic laws and regulations. While our vendor operating guidelines promote ethical business practices for our vendors and suppliers, we do not control these manufacturers or their labor practices. The violation of labor or other laws by an independent manufacturer, or by one of the sourcing agents, or the divergence of an independent manufacturer’s or sourcing agent’s labor practices from those generally accepted as ethical in the United States, could interrupt, or otherwise disrupt the shipment of finished products or damage the Company’s reputation. Any of these, in turn, could have a material adverse effect on the Company’s financial condition and results of operations. To help mitigate this risk, we engage a third party independent contractor to visit the production facilities we receive our products from. This independent contractor assesses the compliance of the facility with, among other things, local and United States labor laws and regulations as well as foreign and domestic fair trade and business practices.

      In fiscal 2004, we sourced 35% of our merchandise from our top three vendors; one company supplied 15% of our merchandise, and two others each supplied 10% of our merchandise. In addition, approximately 68% of our merchandise was directly sourced from our top ten vendors, and one company acted as our agent with respect to the sourcing of 21% of our merchandise. Our relationships with our vendors generally are not on a contractual basis and do not provide assurances on a long-term basis as to adequate supply, quality or acceptable pricing. Most of our vendors could discontinue selling to us at any time. If one or more of our significant vendors were to sever their relationship with us, we could be unable to obtain replacement products in a timely manner, which could cause our sales to decrease.

      We now, and we may in the future, seek to expand our existing business by expanding into new brand concepts and other business opportunities. In particular, we will be opening our first Jimmy’Z concept stores during fiscal 2005. The operation of the Jimmy’Z stores and the sale of Aéropostale, and potentially Jimmy’Z, merchandise over the Internet through our e-commerce business, are subject to numerous risks, including unanticipated operating problems; lack of prior experience; lack of customer acceptance; new vendor relationships; competition from existing and new retailers; and diversion of management’s attention from the Company’s core Aéropostale business. The Jimmy’Z concept involves, among other things, implementation of a retail apparel concept which is subject to many of the same risks as Aéropostale, as well as additional risks inherent with a more fashion driven concept, including risks of difficulty in merchandising, uncertainty of customer acceptance, fluctuations in fashion trends and customer tastes, as well as the attendant mark-down risks. We may not be able to generate continued customer interest in Jimmy’Z stores and its products, and the Jimmy’Z concept may not be able to support the in-store or potentially the Internet sales formats. Risks inherent in any new concept are particularly acute with respect to Jimmy’Z because this is the first significant new venture by us, and the nature of the Jimmy’Z business differs in certain respects from that of our core

Aéropostale business. There can be no assurance that the Jimmy’Z stores or our E-Commerce business will achieve sales and profitability levels justifying our investments in these businesses. If those sales levels are not achieved we may be forced to impair the carrying value our investments which may have a material adverse effect on our results of operations.

      Trade restrictions such as increased tariffs or quotas, or both, could affect the importation of apparel generally and increase the cost and reduce the supply of merchandise available to us. Much of our merchandise is sourced directly from foreign vendors in Europe, Asia and Central America. In addition, many of our domestic vendors maintain production facilities overseas. Some of these facilities are also located in regions that may be affected by political instability that could cause a disruption in trade. Any reduction in merchandise available to us or any increase in its cost due to tariffs, quotas or local political issues could have a material adverse effect on our results of operations.

      Our growth will largely depend on our ability to open and operate new stores successfully. We opened 103 stores in fiscal 2004, 95 stores in fiscal 2003 and 93 stores in fiscal 2002. Additionally, we plan to open more than 100 Aéropostale and Jimmy’Z stores combined in fiscal 2005. We expect to continue to open a significant number of new stores in future years while also remodeling a portion of our existing store base. Our planned expansion will place increased demands on our operational, managerial and administrative resources. These increased demands could cause us to operate our business less effectively, which in turn could cause deterioration in the financial performance of our individual stores. In addition, to the extent that our new store openings are in existing markets, we may experience reduced net sales volumes in previously existing stores in those same markets.

      Unless we continue to do the following, we may be unable to open new stores successfully and, if so, our continued growth would be impaired:

      In addition, we will open new stores in markets in the United States in which we currently have few or no stores. Our experience in these markets is limited and there can be no assurance that we will be able to develop our brand in these markets or adapt to competitive, merchandising and distribution challenges that may be different from those in our existing markets. Our inability to open new stores successfully and/or penetrate new markets would have a material adverse effect on our revenue and earnings growth.

      The Company’s key executive officers have substantial experience and expertise in the retail business and have made significant contributions to the growth and success of the Company’s brands. The unexpected loss of the services of one or more of these individuals could adversely affect the Company. Specifically, if we were to lose the services of Julian R. Geiger, our Chairman and Chief Executive Officer, and/or Christopher L. Finazzo, our Executive Vice President-Chief Merchandising Officer, our business could be adversely affected. In addition, Mr. Geiger and Mr. Finazzo maintain many of our vendor relationships, and the loss of either of them could negatively impact present vendor relationships.

      Our net sales and net income are disproportionately higher from August through January each year due to increased sales from back-to-school and holiday shopping. Sales during this period cannot be used as an accurate indicator for our annual results. Our net sales and net income from February through July are typically lower due to, in part, the traditional retail slowdown immediately following the winter holiday season. Any significant decrease in sales during the back-to-school and winter holiday seasons would have a material adverse effect on our financial condition and results of operations. In addition, in order to prepare for the back-to-school and holiday shopping seasons, we must order and keep in stock significantly more merchandise than we would carry during other parts of the year. Any unanticipated decrease in demand for our products during these peak shopping seasons could require us to sell excess inventory at a substantial markdown, which could reduce our net sales and gross margins and negatively impact our profitability.

      We may not be able to keep pace with the rapidly changing fashion trends and consumer tastes inherent in the apparel industry. Our current design philosophy is based on the belief that our target customers prefer clothing that suits the demands of their active lifestyles and that they like to identify with a logo. Accordingly, we produce casual, comfortable apparel, a majority of which displays either the “Aéropostale” or “Aéro” logo. There can be no assurance that fashion trends will not move away from casual clothing or that we will not have to alter our design strategy to reflect a consumer change in logo preference. Failing to anticipate, identify or react appropriately to changes in styles, trends, desired images or brand preferences, could have a material adverse effect on the Company’s sales, financial condition and results of operations.

      Consumer purchases of discretionary items and retail products, including the Company’s products, may decline during recessionary periods and also may decline at other times when disposable income is lower. A downturn in the economy may adversely affect our sales.

      In order to generate customer traffic, we must locate our stores in prominent locations within successful shopping malls. We cannot control the development of new shopping malls, the availability or cost of appropriate locations within existing or new shopping malls, or the success of individual shopping malls. A significant decrease in shopping mall traffic would have a material adverse effect on our results of operations.

      We maintain one distribution center to receive, store and distribute merchandise to all of our stores. Any significant interruption in the operation of the distribution center due to natural disasters, accidents, system failures or other unforeseen causes could have a material adverse effect on the Company’s financial condition and results.

      The efficient operation of our stores is dependent on our ability to distribute, in a timely manner, merchandise to our store locations throughout the United States. An independent third party operates our distribution and warehouse facility. We depend on this third party to receive, sort, pack and distribute substantially all of our merchandise. This third party employs personnel represented by a labor union. Although there have been no work stoppages or disruptions since the inception of our relationship with this third party provider beginning in 1991, there can be no assurance that work stoppages or disruptions will not occur in the future. We also use a separate third party transportation company to deliver our merchandise from our warehouse to our stores. Any failure by either of these third parties to respond adequately to our warehousing and distribution needs would disrupt our operations and negatively impact our profitability.

      We believe that our key trademarks AÉROPOSTALE® and, to a lesser extent, AERO® are integral to our logo-driven design strategy. We have obtained a federal registration of the AÉROPOSTALE® trademark in the United States and have applied for or obtained registrations in most foreign countries in which our vendors are located. We use the AERO mark in many constantly changing designs and logos even though we have not applied to register every variation or combination thereof for adult clothing. We also believe that the newly obtained JIMMY’Z and Woody Car Design marks are an important part of our growth strategy and expansion of our business. We have acquired federal registrations in the United States and in Canada and have expanded the scope of our filings in the United States Patent and Trademark Office for a greater number of apparel and accessory categories. There can be no assurance that the registrations we own and have obtained will prevent the imitation of our products or infringement of our intellectual property rights by others. If any third party imitates our products in a manner that projects lesser quality or carries a negative connotation, our brand image could be materially adversely affected. Because we have not registered the AERO mark in all forms and categories and have not registered the “AÉROPOSTALE”, “JIMMY’Z” and Woody Car Design marks in all categories or in all foreign countries in which we now or may in the future source or offer our merchandise, international expansion and our merchandising of non-apparel products using these marks could be limited.

      In addition, there can be no assurance that others will not try to block the manufacture, export or sale of our products as violation of their trademarks or other proprietary rights. Other entities may have rights to trademarks that contain the word “AERO” or may have registered similar or competing marks for apparel and accessories in foreign countries in which our vendors are located. Our applications for international registration of the AÉROPOSTALE® mark have been rejected in several countries in which our products are manufactured because third parties have already registered the mark for clothing in those countries. There may also be other prior registrations in other foreign countries of which we are not aware. In addition, we do not own the Jimmy’Z brand outside of the United States and Canada. Accordingly, it may be possible, in those few foreign countries where we were not been able to register the AÉROPOSTALE® mark, or in the countries where the Jimmy’Z brand is owned by a third party, for a third party owner of the national trademark registration for “AÉROPOSTALE”, “JIMMY’Z” or the Woody Car Design to enjoin the manufacture, sale or exportation of Aéropostale or Jimmy’Z branded goods to the United States. If we were unable to reach a licensing arrangement with these parties, our vendors may be unable to manufacture our products in those countries. Our inability to register our trademarks or purchase or license the right to use our trademarks or logos in these jurisdictions could limit our ability to obtain supplies from or manufacture in less costly markets or penetrate new markets should our business plan change to include selling our merchandise in those jurisdictions outside the United States.

      The continued threat of terrorism, heightened security measures and military action in response to an act of terrorism has disrupted commerce and has intensified the uncertainty of the U.S. economy. Any further

acts of terrorism or a future war may disrupt commerce and undermine consumer confidence, which could negatively impact our sales revenue by causing consumer spending and/or mall traffic to decline. Furthermore, an act of terrorism or war, or the threat thereof, could negatively impact our business by interfering with our ability to obtain merchandise from foreign vendors. Inability to obtain merchandise from our foreign vendors or substitute other vendors, at similar costs and in a timely manner, could adversely affect our operating results and financial condition.

      We lease all of our store locations in shopping malls throughout the U.S. Most of our store leases have an initial term of ten years, and require us to pay additional rent based on specified percentages of sales, after we achieve specified annual sales thresholds. Generally, our store leases do not contain extension options. Our store leases typically include a pre-opening period of approximately 60 days that allows us to take possession of the property to construct the store. Typically rent payment commences when the stores open. Generally, our leases allow for termination by us after a certain period of time if sales at that site do not exceed specified levels.

      We lease 38,805 square feet of office space at 112 West 34th Street in New York, New York. The facility is used as our corporate headquarters and for our design, sourcing and production teams. This lease expires in August 2014.

      We also lease 20,000 square feet of office space at 201 Willowbrook Boulevard in Wayne, New Jersey. This facility is used as administrative offices for finance, operations and information systems personnel. This lease expires in January 2013.

      In addition, we also lease, as a subtenant, a 315,000 square foot distribution and warehouse facility in South River, New Jersey. This facility is used to warehouse inventory needed to replenish and back-stock all of our stores, as well as to serve our general warehousing needs. This lease expires in April 2006. On January 24, 2005, we received notice from the sub-landlord of our distribution and warehouse facility that they have elected not to exercise their renewal option to continue leasing the facility from the landlord. We have reached an agreement in principle with the landlord on terms of a long-term lease for the facility directly with them. We are in the process of drafting definitive documentation with the landlord regarding a long-term lease.

      We are party to various litigation matters and proceedings in the ordinary course of business. In the opinion of our management, dispositions of these matters are not expected to have a material adverse affect on our financial position, results from operations or cash flows.

      No matters were submitted to a vote of the Company’s shareholders during the fourth quarter of the fiscal year covered by this report.

PART II

      Our common stock is traded on the New York Stock Exchange under the symbol “ARO”. The following table sets forth the range of high and low sales prices of our common stock as reported on the New York Stock Exchange since February 2, 2003, as adjusted for the three-for-two stock split on all shares of our common stock that was affected on April 26, 2004.

      As of March 16, 2005, there were 55 stockholders of record. However, when including others holding shares in broker accounts under street name, we estimate the shareholder base at approximately 26,000.

      In the fourth quarter of fiscal 2003, our Board of Directors approved a stock repurchase program to acquire up to $35.0 million of our outstanding common stock. In the first quarter of fiscal 2004, our Board of Directors approved an additional $35.0 million of repurchase availability, thereby increasing the amount available for stock repurchase under this program to $70.0 million. On November 16, 2004, our Board of Directors approved an additional $30.0 million of repurchase availability, thereby increasing the amount available for stock repurchase under this program to $100.0 million. The repurchase program may be modified or terminated by the Board of Directors at any time, and there is no expiration date for the program. The extent and timing of repurchases will depend upon general business and market conditions, stock prices, and requirements going forward. Our purchases of treasury stock for the fourth quarter ended January 29, 2005 and remaining availability pursuant to our share repurchase program were the following: