##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the Fiscal Year Ended
    January 28, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934   Commission File Number:
    001-31314
      AÉROPOSTALE,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

No. 31-1443880(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)112 West 34th Street,
    22nd floor
    New York, NY(Address of principal
    executive offices)

10120(Zip
    Code)   Registrants telephone number, including area code:
 (646) 485-5398
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which
    RegisteredCommon Stock, $0.01 par value

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act: None
  þ o
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K, Form 10-K.




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##### 



AÉROPOSTALE,
    INC.
  TABLE OF
    CONTENTS
  PART IItem 1.

Business


2Item 1A.

Risk Factors


8Item 1B.

Unresolved Staff
    Comments


12Item 2.

Properties


12Item 3.

Legal
    Proceedings


13Item 4.

Submission of
    Matters to a Vote of Security Holders


13PART IIItem 5.

Market for the
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


13Item 6.

Selected Financial
    Data


14Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


16Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


23Item 8.

Financial
    Statements and Supplementary Data


24Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


44Item 9A.

Controls and
    Procedures


44Item 9B.

Other
    Information


44PART IIIItem 10.

Directors and
    Executive Officers of the Registrant


45Item 11.

Executive
    Compensation


45Item 12.

Security Ownership
    of Certain Beneficial Owners and Management


45Item 13.

Certain
    Relationships and Related Transactions


45Item 14.

Principal
    Accountant Fees and Services


45PART IVItem 15.

Exhibits and
    Financial Statement Schedule


45Signatures


48EX-10.10: MERCHANDISE SERVICING AGREEMENTEX-21: SUBSIDIARIESEX-23.1: CONSENT OF DELOITTE & TOUCHE LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   1




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##### 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,
    annual Proxy filings 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  Item 1.
    Business  Overview
  e-commerce www.aeropostale.com
  e-commerce
  three-for-two
  52-week 52-week 52-week 53-week
  Growth
    Strategy
  Continue to open new Aéropostale
    stores.
 2




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##### Table of Contents



Stores Store design and
    environment
  Enhance and expand our brand.
  Continue high levels of store productivity.
  New
    Business Opportunities
  JimmyZ. ®
  E-Commerce. e-commerce www.aeropostale.com e-commerce
  Stores
  Existing stores.
  Number of

Number

TotalAéropostale

of JimmyZ

Number ofState

Stores

Stores

StoresAlabama


14







14Arkansas


3







3Arizona


11







11California


38



1



39Colorado


9







9Connecticut


10







10Delaware


4







4Florida


32



1



33Georgia


17







17Idaho


1







1Illinois


25



1



26Indiana


20







20Iowa


12







12Kansas


6







6Kentucky


9







9Louisiana


11







11Massachusetts


22







22Maryland


16







16Maine


3







3Michigan


27







27Minnesota


14



1



15Mississippi


5







5Missouri


15



1



16Montana


1







1North Carolina


21



1



22North Dakota


4







4Nebraska


4







4New Hampshire


6







6New Jersey


24







24New Mexico


1







1Nevada


2







2New York


45



1



46 3




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##### Table of Contents



Number of

Number

TotalAéropostale

of JimmyZ

Number ofState

Stores

Stores

StoresOhio


33







33Oklahoma


6







6Oregon


4







4Pennsylvania


45



3



48Rhode Island


1







1South Carolina


11







11South Dakota


2







2Tennessee


19



1



20Texas


40



2



42Utah


7







7Virginia


23







23Vermont


2







2Washington


11







11Wisconsin


15



1



16West Virginia


6







6Total


657



14



671     TotalAéropostale

JimmyZ

Total

Aéropostale

Number ofStores

Stores

Stores

Stores

Stores at EndOpened

Opened

Opened

Closed

of PeriodFiscal 2003


95







95



3



459Fiscal 2004


103







103



1



561Fiscal 2005


105



14



119



9



671   Store design and environment.
  New Store design.
    Store management.
  Expansion opportunities and site
    selection.
 4




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##### Table of Contents



Pricing
    Design
    and Merchandising
    Design.
  Merchandising.
    Fiscal2005


2004


2003Young Womens


61%



60%



60%Young Mens


25%



26%



27%Accessories


14%



14%



13%   Sourcing
     5




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##### Table of Contents



Marketing
    and Advertising
    e-commerce www.aeropostale.com
    Distribution
        Information
    Systems
    
    point-of-sale;
    inventory management; 6




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##### Table of Contents




    supply chain;
    planning and replenishment; and
    financial reporting.  point-of-sale
  Trademarks
  ® tm sm
  ®
  Competition
  ® ® ® ® ® ®
    Employees
    Seasonality
  back-to-school
  Available
    Information
  www.aeropostale.com Form 10-K, Form 10-Q Form 8-K,
 7




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##### Table of Contents



www.aeropostale.com
  Item 1A.
    Risk
    Factors  Cautionary
    Note Regarding Forward-Looking Statements
  Form 10-K
  Fluctuations
    in Comparable Store Sales and Quarterly Results of Operations
    May Cause the Price of our Common Stock to Decline
    Substantially.
    
    fashion trends;
    changes in our merchandise mix;
    the effectiveness of our inventory management;
    actions of competitors or mall anchor tenants;
    calendar shifts of holiday or seasonal periods;
    changes in general economic conditions and consumer spending
    patterns;
    the timing of promotional events; and
    weather conditions.    If We
    Are Unable to Identify and Respond to Consumers Fashion
    Preferences in a Timely Manner, our Profitability Would
    Decline.
   8




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Our
    Business Could Suffer As a Result of a Manufacturers
    Inability to Produce Merchandise on Time and to
    Specifications.
    Our
    Business Could Suffer if a Manufacturer Fails to Use Acceptable
    Labor Practices.
    We
    Rely on a Small Number of Vendors to Supply a Significant Amount
    of our Merchandise.
    Foreign
    Suppliers Manufacture Most of Our Merchandise and the
    Availability and Costs of These Products May Be Negatively
    Affected by Risks Associated with International
    Trade.
    Our
    Growth Strategy Relies on the Continued Addition of a
    Significant Number of New Stores Each Year, Which Could Strain
    Our Resources and Cause the Performance of Our Existing Stores
    to Suffer.
   9




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##### Table of Contents



Our
    Continued Expansion Plan is Dependent on a Number of Factors
    Which, if Not Implemented, Could Delay or Prevent the Successful
    Opening of New Stores and Penetration into New
    Markets.
    
    identify suitable markets and sites for new store locations;
    negotiate acceptable lease terms;
    hire, train and retain competent store personnel;
    foster current relationships and develop new relationships with
    vendors that are capable of supplying a greater volume of
    merchandise;
    manage inventory effectively to meet the needs of new and
    existing stores on a timely basis;
    expand our infrastructure to accommodate growth; and
    generate sufficient operating cash flows or secure adequate
    capital on commercially reasonable terms to fund our expansion
    plans.  and/or
  The
    Loss of the Services of Key Personnel Could Have a Material
    Adverse Effect on Our Business.
  and/or
  Failure
    of New Business Concepts Would Have an Effect on Our Results of
    Operations.
   10




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##### Table of Contents



Our
    Net Sales and Inventory Levels Fluctuate on a Seasonal
    Basis.
  back-to-school back-to-school back-to-school
  A
    Downturn in the United States Economy May Affect Consumer
    Spending Habits.
    Our
    Ability to Attract Customers to Our Stores Depends Heavily on
    the Success of the Shopping Malls in Which We are
    Located.
    We
    Rely on a Single Distribution Center.
    We
    Rely on a Third Party to Manage Our Distribution
    Center.
    Failure
    to Protect Our Trademarks Adequately Could Negatively Impact Our
    Brand Image and Limit Our Ability to Penetrate New
    Markets.
  ® ® ®
 11




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##### Table of Contents



® ®
  The
    Effects of War or Acts of Terrorism Could Have a Material
    Adverse Effect on Our Operating Results and Financial
    Condition.
  and/or
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties     12




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Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholder
    Matters and Issuer Purchases of Equity Securities  three-for-two
  Market PriceHigh


LowFiscal 20054th quarter

$
31.00


$
18.853rd quarter


29.81



18.052nd quarter


35.46



25.311st quarter


35.10



26.75Fiscal 20044th quarter

$
34.38


$
25.653rd quarter


33.98



25.872nd quarter


30.94



21.991st quarter


25.20



19.86    13




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##### Table of Contents



Total Number of

Approximate DollarTotal Number



Shares Purchased

Value of Sharesof Shares

Average

as Part of Publicly

that may yet be(or Units)

Price Paid

Announced Plans

Purchased Under thePeriod

Purchased

per Share

or Programs

Plans or Programs(In thousands)



(In thousands)

(In thousands)November 2005





$







$
50,723December 2005


265,700


$
24.69



265,700


$
44,163January 2006


80,000


$
28.85



80,000


$
41,855Total


345,700


$
25.65



345,700   Item 6.
    Selected
    Financial Data   14




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##### Table of Contents



52 WeekPeriod








Fiscal YearFiscal Year Ended


Ended


Six Month Period Ended


EndedJanuary 28,


January 29,


January 31,


February 1,


February 2,


February 2,


February 3,


August 4,2006


2005


2004


2003


2002


2002


2001


2001(In thousands, except per share
    data)Statement of Income
    Data:Net sales

$
1,204,347


$
964,212


$
734,868


$
550,904


$
404,438


$
284,040


$
184,369


$
304,767Gross profit, as a percent of sales


30.1
%


33.2
%


31.3
%


29.5
%


32.2
%


36.6
%


32.4
%


28.3
%SG&A, as a percent of sales


18.9
%


19.1
%


19.3
%


20.1
%


21.4
%


19.4
%


18.7
%


21.6
%Net income, as a percent of sales


7.0
%


8.7
%


7.4
%


5.7
%


6.6
%


10.7
%


8.2
%


3.7
%Income from continuing operations


83,954



84,112



54,254



31,290



24,857



28,637



14,694



10,914Net income


83,954



84,112



54,254



31,290



26,506



30,269



15,082



11,319Preferred dividends














362



1,113



574



508



1,048Net income available to common
    stockholders

$
83,954


$
84,112


$
54,254


$
30,928


$
25,393


$
29,695


$
14,574


$
10,271Diluted earnings per common share:From continuing operations

$
1.50


$
1.47


$
0.93


$
0.54


$
0.44


$
0.52


$
0.27


$
0.19From discontinued operations


























0.01



From cumulative accounting change


















0.03



0.03







Diluted earnings per common share

$
1.50


$
1.47


$
0.93


$
0.54


$
0.47


$
0.55


$
0.28


$
0.19Selected Operating
    Data:Number of stores open at end of
    period


671



561



459



367



278



278



224



252Comparable store sales increase


3.5
%


8.7
%


6.6
%


6.6
%


15.5
%


23.0
%


14.5
%


8.7
%Average store sales (in thousands)

$
1,890


$
1,849


$
1,728


$
1,651


$
1,521


$
1,028


$
872


$
1,360Average square footage per store


3,537



3,512



3,511



3,541



3,463



3,463



3,460



3,437Sales per square foot

$
534


$
526


$
491


$
471


$
456


$
297


$
250


$
392   As ofJanuary 28,


January 29,


January 31,


February 1,


February 2,2006


2005


2004


2003


2002(In thousands)Balance Sheet Data:Working capital

$
212,986


$
182,493


$
140,879


$
86,791


$
38,181Total assets


503,951



405,819



307,048



223,032



146,927121/2%
    Series B redeemable preferred stock


















9,617Total debt


















Total stockholders equity


284,790



238,251



185,693



127,959



60,190Cash dividends declared per common
    share


















   three-for-two
 15




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Introduction
  e-commerce www.aeropostale.com e-commerce
    Overview
     16




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##### Table of Contents



Fiscal Year EndedJanuary 28,


January 29,


January 31,2006


2005


2004Net sales (in millions)

$
1,204.3


$
964.2


$
734.9Total store count at end of period


671



561



459Comparable store count at end of
    period


550



448



359Net sales growth


24.9
%


31.2
%


33.4
%Comparable store sales growth


3.5
%


8.7
%


6.6
%Net sales per average square foot

$
534


$
526


$
491Gross profit (in millions)

$
362.5


$
319.9


$
229.7Income from operations (in
    millions)

$
135.4


$
135.9


$
88.2Diluted earnings per share

$
1.50


$
1.47


$
0.93Square footage growth


20.0
%


23.0
%


24.0
%Increase in total inventory at end
    of period


13
%


31
%


33
%(Decrease) increase in inventory
    per square foot at end of period


(6
)%


7
%


7
%Percentages of net sales by
    categoryWomens


61
%


60
%


60
%Mens


25
%


26
%


27
%Accessories


14
%


14
%


13
%   Results
    of Operations
    Fiscal Year EndedJanuary 28,

January 29,

January 31,2006

2005

2004Net sales


100.0
%


100.0
%


100.0
%Gross profit


30.1



33.2



31.3SG&A


18.9



19.1



19.3Income from operations


11.2



14.1



12.0Interest income, net


0.3



0.1



0.1Income before income taxes


11.5



14.2



12.1Income taxes


4.5



5.5



4.7Net income


7.0
%


8.7
%


7.4
%   Sales
  e-commerce
   17




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##### Table of Contents



Cost
    of Sales and Gross Profit
        SG&A
       18




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##### Table of Contents



Interest
    Income
    Income
    Taxes
    Net
    Income and Earnings Per Share
      Liquidity
    and Capital Resources
      Fiscal Year EndedJanuary 28,


January 29,


January 31,2006


2005


2004Net cash from operating activities

$
144,384


$
136,975


$
103,500Net cash from investing activities


(2,102
)


(124,301
)


(35,926
)Net cash from financing activities


(43,175
)


(44,902
)


(16,693
)Net increase (decrease) in cash
    and cash equivalents

$
99,107


$
(32,228
)

$
50,881  19




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##### Table of Contents



Operating
    Activities
    Investing
    Activities
    available-for-sale Accounting
    for Certain Investments in Debt and Equity Securities.
  Financing
    Activities
     20




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##### Table of Contents



Inflation
    Contractual
    Obligations
    Payments Due by PeriodLess Than


1-3


3-5


More thanTotal


1 Year


Years


Years


5 Years(In thousands)Contractual Obligations:Employment agreements

$
3,204


$
2,277


$
927


$



$
Event sponsorship agreement


1,810



900



910







Operating leases


506,631



65,759



132,468



123,193



185,211Total contractual obligations

$
511,645


$
68,936


$
134,305


$
123,193


$
185,211       Off-Balance
    Sheet Arrangements
    Critical
    Accounting Estimates
     21




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##### Table of Contents



Merchandise
    Inventory
  first-in,
  Defined
    Benefit Pension Plan
    Finite
    Lived Assets
    
    significant changes in the manner of our use of assets or the
    strategy for our overall business;
    significant negative industry or economic trends;
    store closings; or
    under-performing business trends.    Income
    Taxes
  Accounting for Income Taxes.
 22




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##### Table of Contents



Recent
    Accounting Developments
  Recent Accounting Developments
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk   23




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  PageReports of
    Independent Registered Public Accounting Firm


25 and 26Consolidated
    Balance Sheets


27Consolidated
    Statements of Income and Comprehensive Income


28Consolidated
    Statements of Stockholders Equity


29Consolidated
    Statements of Cash Flows


30Notes to
    Consolidated Financial Statements


31  24




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM            Deloitte &
    Touche LLP
    25




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Managements Report on Internal Control
    over Financial Reporting
            Deloitte &
    Touche LLP
    26




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##### Table of Contents



AÉROPOSTALE,
    INC.
  CONSOLIDATED BALANCE SHEETS
  January 28,


January 29,2006


2005(In thousands)ASSETSCurrent assets:Cash and cash equivalents

$
205,235


$
106,128Short-term investments


20,037



76,224Merchandise inventory


91,908



81,238Prepaid expenses


12,314



10,138Other current assets


9,845



5,759Total current assets


339,339



279,487Fixtures, equipment and
    improvements  net


160,229



122,651Intangible assets


2,455



2,529Other assets


1,928



1,152Total assets

$
503,951


$
405,819LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
57,165


$
44,858Deferred income taxes


5,195



893Accrued expenses


63,993



51,243Total current liabilities


126,353



96,994Deferred rent and tenant allowances


81,499



63,065Retirement benefit plan liabilities


8,654



6,158Deferred income taxes


2,655



1,351Commitments and contingent
    liabilitiesStockholders equityCommon stock  par
    value, $0.01 per share; 200,000 shares authorized,
    58,598 and 58,115 shares issued


586



581Preferred
    stock  par value, $0.01 per share;
    5,000 shares authorized, no shares issued or outstanding






Additional paid-in capital


88,213



79,069Other comprehensive loss


(1,557
)


(1,271
)Deferred compensation


(2,577
)


(817
)Retained earnings


308,269



224,315Treasury stock at cost (4,548 and
    2,749 shares)


(108,144
)


(63,626
)Total stockholders equity


284,790



238,251Total liabilities and
    stockholders equity

$
503,951


$
405,819    27




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##### Table of Contents



AÉROPOSTALE,
    INC.
  CONSOLIDATED
    STATEMENTS OF INCOME
  Fiscal Year EndedJanuary 28,


January 29,


January 31,2006


2005


2004(In thousands, except per share
    data)Net sales

$
1,204,347


$
964,212


$
734,868Cost of sales (includes certain
    buying, occupancy and warehousing expenses)


841,872



644,305



505,152Gross profit


362,475



319,907



229,716Selling, general and
    administrative expenses


227,044



183,977



141,520Income from operations


135,431



135,930



88,196Interest income, net of interest
    expense of $42, $125, and $286


3,670



1,438



760Income before income taxes


139,101



137,368



88,956Income taxes


55,147



53,256



34,702Net income

$
83,954


$
84,112


$
54,254Basic earnings per common share

$
1.53


$
1.51


$
0.99Diluted earnings per common share

$
1.50


$
1.47


$
0.93Weighted average basic shares


54,994



55,735



54,758Weighted average diluted shares


55,937



57,255



58,287  CONSOLIDATED
    STATEMENTS OF COMPREHENSIVE INCOME  Fiscal Year EndedJanuary 28,


January 29,


January 31,2006


2005


2004(In thousands)Net income

$
83,954


$
84,112


$
54,254Minimum pension liability
    adjustment, net of tax


(740
)


(145
)


(672
)Comprehensive income

$
83,214


$
83,967


$
53,582    28




---



##### Table of Contents



AÉROPOSTALE,
    INC.
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS
    EQUITY
  Additional





Treasury Stock,


OtherCommon Stock


Paid-in


Deferred


at Cost


Comprehensive


RetainedShares


Amount


Capital


Compensation


Shares


Amount


Loss


Earnings


TotalBALANCE, FEBRUARY 1, 2003


52,959


$
530


$
41,480


$







$



$



$
85,949


$
127,959Net income






























54,254



54,254Stock options exercised


3,836



38



1,027























1,065Tax benefit related to exercise of
    stock options










20,782























20,782Repurchase of common stock


















(945
)


(17,695
)










(17,695
)Other comprehensive loss


























(672
)






(672
)BALANCE, JANUARY 31, 2004


56,795



568



63,289







(945
)


(17,695
)


(672
)


140,203



185,693Net income






























84,112



84,112Stock options exercised


1,320



13



1,016























1,029Tax benefit related to exercise of
    stock options










12,893























12,893Repurchase of common stock


















(1,804
)


(45,931
)










(45,931
)Issuance of restricted stock










1,871



(1,871
)


















Amortization of restricted stock














600



















600Other comprehensive loss


























(145
)






(145
)BALANCE, JANUARY 29, 2005


58,115



581



79,069



(1,271
)


(2,749
)


(63,626
)


(817
)


224,315



238,251Net income






























83,954



83,954Stock options exercised


477



5



1,338























1,343Tax benefit related to exercise of
    stock options










4,759























4,759Repurchase of common stock


















(1,799
)


(44,518
)










(44,518
)Net issuance of restricted stock










3,047



(3,047
)


















Amortization of restricted stock














1,741



















1,741Vesting of restricted stock


6































Other comprehensive loss


























(740
)






(740
)BALANCE, JANUARY 28, 2006


58,598


$
586


$
88,213


$
(2,577
)


(4,548
)

$
(108,144
)

$
(1,557
)

$
308,269


$
284,790    29




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##### Table of Contents



AÉROPOSTALE,
    INC.
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Fiscal Year EndedJanuary 28,


January 29,


January 31,2006


2005


2004(In thousands)Cash Flows From Operating
    ActivitiesNet income

$
83,954


$
84,112


$
54,254Adjustments to reconcile net
    income to net cash from operating activities:Depreciation and amortization


22,347



16,635



12,518Amortization of tenant allowances
    and above market leases


(7,756
)


(6,717
)


(4,624
)Amortization of deferred rent
    expense


3,716



7,474



1,927Pension expense


1,672



3,008



558Deferred income tax expense


6,100



2,409



6,404Other


1,741



(597
)


400Changes in operating assets and
    liabilities:Merchandise inventory


(10,670
)


(19,431
)


(15,162
)Prepaid expenses and other assets


(7,059
)


(3,741
)


(3,084
)Accounts payable


12,307



14,381



12,523Accrued expenses and other
    liabilities


38,032



39,442



37,786Net cash from operating
    activities


144,384



136,975



103,500Cash Flows From Investing
    ActivitiesPurchase of fixtures, equipment
    and improvements


(58,289
)


(46,677
)


(35,926
)Purchase of short-term investments


(310,901
)


(441,386
)


(145,945
)Sale of short-term investments


367,088



365,162



145,945Purchase of intangible assets






(1,400
)


Net cash from investing
    activities


(2,102
)


(124,301
)


(35,926
)Cash Flows From Financing
    ActivitiesPurchase of treasury stock


(44,518
)


(45,931
)


(17,695
)Proceeds from stock options
    exercised


1,343



1,029



1,065Payment of deferred finance costs










(63
)Net cash from financing
    activities


(43,175
)


(44,902
)


(16,693
)Net Increase (Decrease) In Cash
    And Cash Equivalents


99,107



(32,228
)


50,881Cash And Cash Equivalents,
    Beginning Of Year


106,128



138,356



87,475Cash And Cash Equivalents, End
    Of Year

$
205,235


$
106,128


$
138,356Supplemental Disclosures Of
    Cash Flow InformationInterest paid

$
21


$
94


$
234Income taxes paid

$
37,274


$
36,456


$
13,839Tax benefit related to exercise of
    stock options included in change in accrued expenses and other
    liabilities

$
4,759


$
12,893


$
20,782Non-cash operating and investing
    activities

$
1,541


$



$
    30




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##### Table of Contents



AÉROPOSTALE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  1.
    Summary
    of Significant Accounting Policies  Organization
    Fiscal
    Year
  52-week 52-week 52-week
  Use of
    Estimates
      Seasonality
  back-to-school
  Cash
    Equivalents
    Merchandise
    Inventory
  first-in,
 31




---



##### Table of Contents



AÉROPOSTALE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Fixtures,
    Equipment and Improvements
    Fixtures and equipment

10 yearsLeasehold improvements

Lesser of life of the asset or
    lease termComputer equipment and software

5 years   Evaluation
    for Long Lived Asset Impairment
  Accounting for the Impairment or Disposal of Long-lived
    Assets.
  Pre-Opening
    Expenses
    Leases
        Revenue
    Recognition
  e-commerce
 32




---



##### Table of Contents



AÉROPOSTALE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Cost
    of Sales
    Selling,
    General and Administrative Expenses
    Medical
    Self-Insurance
    Marketing
    Costs
   33




---



##### Table of Contents



AÉROPOSTALE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Stock-Based
    Compensation
  Accounting for Stock
    Issued to Employees Accounting for
    Stock-Based Compensation  Transition and
    Disclosure
  Fiscal2005


2004


2003(In thousands, except per share
    data)Net income:As reported

$
83,954


$
84,112


$
54,254Add: restricted stock
    amortization, net of taxes


1,050



366



Less: total stock-based
    compensation expense determined under fair value method, net of
    taxes


(2,756
)


(1,525
)


(375
)Pro-forma

$
82,248


$
82,953


$
53,879Basic earnings per common share:As reported

$
1.53


$
1.51


$
0.99Pro-forma

$
1.50


$
1.49


$
0.98Diluted earnings per common share:As reported

$
1.50


$
1.47


$
0.93Pro-forma

$
1.47


$
1.45


$
0.92     Fiscal2005


2004


2003Expected volatility


40
%


69
%


70
%Expected life


5 years



5 years



4.7 yearsRisk-free interest rate


4.11
%


2.80
%


2.81
%Expected dividend yield


0
%


0
%


0
%     Segment
    Reporting
  Disclosures about Segments of an
    Enterprise and Related Information,
 34




---



##### Table of Contents



AÉROPOSTALE,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  e-commerce
  FiscalMerchandise Categories

2005


2004


2003Young Womens


61
%


60
%


60
%Young Mens


25



26



27Accessories


14



14



13Total Merchandise Sales


100
%


100
%


100
%   Recent
    Accounting Developments
  Accounting
    Changes and Error Corrections.
  Share-Based Payment, a revision of SFAS No. 123,
    Accounting for Stock-Based Compensation,
  Accounting for Conditional Asset Retirement
    Obligations Accounting for Asset Retirement Obligations and/or
  2.
    Common
    Stock Split  three-for-two
 35




---



##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






3.
    Short-Term Investments




available-for-sale Accounting for Certain Investments in Debt and Equity
    Securities.




|   |                                
|-- | -------------------------------
|4. | Supplier
    Risk Concentration







|   |                                               
|-- | ----------------------------------------------
|5. | Fixtures,
    Equipment and Improvements  Net







|                                                   |  |                  |         |  |                  |   |         | 
|-------------------------------------------------- |  | ---------------- | ------- |  | ---------------- | - | ------- | 
|                                                   |  | January 28, 2006 |         |  | January 29, 2005 |  
|                                                  
|Leasehold improvements                             |  | $                | 135,619 |  |                  | $ | 99,292  | 
|Store fixtures and equipment                       |  |                  | 68,073  |  |                  |   | 50,003  | 
|Computer equipment and software                    |  |                  | 18,178  |  |                  |   | 12,917  | 
|Construction in progress                           |  |                  | 1,687   |  |                  |   | 2,739   | 
|                                                   |  |                  |         |  |                  |   |         | 
|                                                   |  |                  | 223,557 |  |                  |   | 164,951 | 
|Less accumulated depreciation and
    amortization |  |                  | 63,328  |  |                  |   | 42,300  | 
|                                                   |  |                  |         |  |                  |   |         | 
|                                                   |  | $                | 160,229 |  |                  | $ | 122,651 | 
|                                                   |  |                  |         |  |                  |   |         | 









|   |                     
|-- | --------------------
|6. | Accrued
    Expenses







|                                          |  |                  |        |  |                  |   |        | 
|----------------------------------------- |  | ---------------- | ------ |  | ---------------- | - | ------ | 
|                                          |  | January 28, 2006 |        |  | January 29, 2005 |  
|                                         
|Accrued compensation                      |  | $                | 10,714 |  |                  | $ | 14,580 | 
|Sales and use tax                         |  |                  | 2,868  |  |                  |   | 2,284  | 
|Accrued rent                              |  |                  | 9,933  |  |                  |   | 8,401  | 
|Accrued gift certificates and
    credits |  |                  | 16,327 |  |                  |   | 12,294 | 
|Income tax payable                        |  |                  | 14,159 |  |                  |   | 6,322  | 
|Sales return liability                    |  |                  | 654    |  |                  |   | 525    | 
|Payroll tax liabilities                   |  |                  | 1,033  |  |                  |   | 1,385  | 
|Other                                     |  |                  | 8,305  |  |                  |   | 5,452  | 
|                                          |  |                  |        |  |                  |   |        | 
|                                          |  | $                | 63,993 |  |                  | $ | 51,243 | 
|                                          |  |                  |        |  |                  |   |        | 



36



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##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






|   |                              
|-- | -----------------------------
|7. | Revolving
    Credit Facility







|   |                       
|-- | ----------------------
|8. | Earnings
    Per Share



Earnings Per
    Share








|                                |  |        |        |  |      |   |        |      |  |   |        | 
|------------------------------- |  | ------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                                |  | Fiscal |       
|                                |  | 2005   |        |  | 2004 |   |        | 2003 | 
|                               
|Net income                      |  | $      | 83,954 |  |      | $ | 84,112 |      |  | $ | 54,254 | 
|                                |  |        |        |  |      |   |        |      |  |   |        | 
|Weighted average basic shares   |  |        | 54,994 |  |      |   | 55,735 |      |  |   | 54,758 | 
|Impact of dilutive securities   |  |        | 943    |  |      |   | 1,520  |      |  |   | 3,529  | 
|                                |  |        |        |  |      |   |        |      |  |   |        | 
|Weighted average diluted shares |  |        | 55,937 |  |      |   | 57,255 |      |  |   | 58,287 | 
|                                |  |        |        |  |      |   |        |      |  |   |        | 
|Per common share:               |  |        |        |  |      |   |        |      |  |   |        | 
|Basic earnings per share        |  | $      | 1.53   |  |      | $ | 1.51   |      |  | $ | 0.99   | 
|                                |  |        |        |  |      |   |        |      |  |   |        | 
|Diluted earnings per share      |  | $      | 1.50   |  |      | $ | 1.47   |      |  | $ | 0.93   | 
|                                |  |        |        |  |      |   |        |      |  |   |        | 







37



---



##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






|   |                          
|-- | -------------------------
|9. | Common
    Stock Offering







|    |                             
|--- | ----------------------------
|10. | Stock-Based
    Compensation











|                                                                   |  |             |       |   |             |   |       |             |  |  |          |   |  |        |       |  |          |  |        |   |  |   |      | 
|------------------------------------------------------------------ |  | ----------- | ----- | - | ----------- | - | ----- | ----------- |  |  | -------- | - |  | ------ | ----- |  | -------- |  | ------ | - |  | - | ---- | 
|                                                                   |  | Fiscal 2005 |       |   | Fiscal 2004 |   |       | Fiscal 2003 | 
|                                                                   |  |             |       |   | Weighted    |   |       |             |  |  | Weighted |   |  |        |       |  | Weighted | 
|                                                                   |  |             |       |   | Average     |   |       |             |  |  | Average  |   |  |        |       |  | Average  | 
|                                                                   |  |             |       |   | Exercise    |   |       |             |  |  | Exercise |   |  |        |       |  | Exercise | 
|                                                                   |  | Shares      |       |   | Price       |   |       | Shares      |  |  | Price    |   |  | Shares |       |  | Price    | 
|                                                                  
|Outstanding, beginning of period                                   |  |             | 2,258 |   |             | $ | 7.93  |             |  |  | 3,092    |   |  | $      | 2.23  |  |          |  | 6,234  |   |  | $ | 0.24 | 
|Granted                                                            |  |             | 321   |   |             |   | 32.33 |             |  |  | 528      |   |  |        | 23.79 |  |          |  | 744    |   |  |   | 9.05 | 
|Exercised                                                          |  |             | (477  | ) |             |   | 2.82  |             |  |  | (1,320   | ) |  |        | 0.78  |  |          |  | (3,836 | ) |  |   | 0.28 | 
|Forfeited                                                          |  |             | (61   | ) |             |   | 18.81 |             |  |  | (42      | ) |  |        | 12.88 |  |          |  | (50    | ) |  |   | 5.38 | 
|                                                                   |  |             |       |   |             |   |       |             |  |  |          |   |  |        |       |  |          |  |        |   |  |   |      | 
|Outstanding, end of period                                         |  |             | 2,041 |   |             | $ | 12.63 |             |  |  | 2,258    |   |  | $      | 7.93  |  |          |  | 3,092  |   |  | $ | 2.23 | 
|                                                                   |  |             |       |   |             |   |       |             |  |  |          |   |  |        |       |  |          |  |        |   |  |   |      | 
|Options exercisable at end of
    period                           |  |             | 1,106 |   |             | $ | 4.27  |             |  |  | 1,314    |   |  | $      | 1.36  |  |          |  | 2,454  |   |  | $ | 0.41 | 
|                                                                   |  |             |       |   |             |   |       |             |  |  |          |   |  |        |       |  |          |  |        |   |  |   |      | 
|Weighted average fair value of
    options granted during the year |  |             |       |   |             | $ | 13.34 |             |  |  |          |   |  | $      | 13.99 |  |          |  |        |   |  | $ | 5.28 | 
|                                                                   |  |             |       |   |             |   |       |             |  |  |          |   |  |        |       |  |          |  |        |   |  |   |      | 









|                             |  |             |                     |  |                  |  |     |                  |  |   |             |  |  |                  |       |  |  |   |       | 
|---------------------------- |  | ----------- | ------------------- |  | ---------------- |  | --- | ---------------- |  | - | ----------- |  |  | ---------------- | ----- |  |  | - | ----- | 
|Options Outstanding          |  |             | Options Exercisable | 
|                             |  | Number      |                     |  | Weighted-Average |  |     |                  |  |   | Number      |  |  |                  |      
|                             |  | Outstanding |                     |  | Remaining        |  |     |                  |  |   | Exercisable |  |  |                  |      
|                             |  | at          |                     |  | Contractual      |  |     |                  |  |   | at          |  |  |                  |      
|                             |  | January 28, |                     |  | Life             |  |     | Weighted-Average |  |   | January 28, |  |  | Weighted-Average |      
|Range of Exercise
    Prices |  | 2006        |                     |  | (Years)          |  |     | Exercise Price   |  |   | 2006        |  |  | Exercise Price   |      
|                            
|$0.02                        |  |             | 321                 |  |                  |  | 0.5 |                  |  | $ | 0.02        |  |  |                  | 321   |  |  | $ | 0.02  | 
|0.26 to 0.57                 |  |             | 473                 |  |                  |  | 2.7 |                  |  | $ | 0.41        |  |  |                  | 473   |  |  | $ | 0.41  | 
|7.63 to 11.80                |  |             | 447                 |  |                  |  | 5.2 |                  |  | $ | 8.90        |  |  |                  | 188   |  |  | $ | 8.86  | 
|18.57 to 23.32               |  |             | 461                 |  |                  |  | 6.2 |                  |  | $ | 23.13       |  |  |                  | 117   |  |  | $ | 22.70 | 
|23.91 to 33.65               |  |             | 339                 |  |                  |  | 7.1 |                  |  | $ | 32.32       |  |  |                  | 7     |  |  | $ | 31.15 | 
|                             |  |             |                     |  |                  |  |     |                  |  |   |             |  |  |                  |       |  |  |   |       | 
|                             |  |             | 2,041               |  |                  |  |     |                  |  |   |             |  |  |                  | 1,106 |  |  |   |       | 
|                             |  |             |                     |  |                  |  |     |                  |  |   |             |  |  |                  |       |  |  |   |       | 







38



---



##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






|    |                             
|--- | ----------------------------
|11. | Retirement
    Benefit Plans















|                                                     |  |             |         |   |             |   |         |  
|---------------------------------------------------- |  | ----------- | ------- | - | ----------- | - | ------- | -
|                                                     |  | January 28, |         |   | January 29, |  
|                                                     |  | 2006        |         |   | 2005        |  
|                                                    
|CHANGE IN BENEFIT OBLIGATION:                        |  |             |         |   |             |   |         |  
|Net benefit obligation at
    beginning of period    |  | $           | 10,884  |   |             | $ | 5,753   |  
|Service cost                                         |  |             | 421     |   |             |   | 278     |  
|Interest cost                                        |  |             | 732     |   |             |   | 626     |  
|Plan amendments                                      |  |             |        |   |             |   | 1,203   |  
|Actuarial loss                                       |  |             | 3,303   |   |             |   | 5,712   |  
|Settlements                                          |  |             |        |   |             |   | (270    | )
|Gross benefits paid                                  |  |             | (336    | ) |             |   | (2,418  | )
|                                                     |  |             |         |   |             |   |         |  
|Net benefit obligation at end of
    period          |  | $           | 15,004  |   |             | $ | 10,884  |  
|                                                     |  |             |         |   |             |   |         |  
|Accumulated benefit obligation                       |  | $           | 8,446   |   |             | $ | 5,845   |  
|                                                     |  |             |         |   |             |   |         |  
|CHANGE IN PLAN ASSETS:                               |  |             |         |   |             |   |         |  
|Fair value of plan assets at
    beginning of period |  | $           |        |   |             | $ |        |  
|Employer contributions                               |  |             | 336     |   |             |   | 2,418   |  
|Gross benefits paid                                  |  |             | (336    | ) |             |   | (2,418  | )
|Actual return on plan assets                         |  |             |        |   |             |   |        |  
|                                                     |  |             |         |   |             |   |         |  
|Fair value of plan assets at end
    of period       |  | $           |        |   |             | $ |        |  
|                                                     |  |             |         |   |             |   |         |  
|Funded status at end of period                       |  | $           | (15,004 | ) |             | $ | (10,884 | )
|Unrecognized net actuarial gain                      |  |             | 9,130   |   |             |   | 6,377   |  
|Prior service and cost                               |  |             | 1,055   |   |             |   | 1,129   |  
|Unrecognized transition amount                       |  |             |        |   |             |   |        |  
|                                                     |  |             |         |   |             |   |         |  
|Net amount recognized                                |  | $           | (4,819  | ) |             | $ | (3,378  | )
|                                                     |  |             |         |   |             |   |         |  
|Intangible assets                                    |  | $           | 1,055   |   |             | $ | 1,129   |  
|Accrued benefit cost                                 |  |             | (8,446  | ) |             |   | (5,845  | )
|Accumulated other comprehensive
    income           |  |             | 2,572   |   |             |   | 1,338   |  
|                                                     |  |             |         |   |             |   |         |  
|Net amount recognized                                |  | $           | (4,819  | ) |             | $ | (3,378  | )
|                                                     |  |             |         |   |             |   |         |  



39



---



##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)










|                                                         |  |        |       |   |      |   |       |      |  |   |      |  
|-------------------------------------------------------- |  | ------ | ----- | - | ---- | - | ----- | ---- |  | - | ---- | -
|                                                         |  | Fiscal |      
|                                                         |  | 2005   |       |   | 2004 |   |       | 2003 | 
|                                                        
|COMPONENTS OF NET PERIODIC BENEFIT
    COST:             |  |        |       |   |      |   |       |      |  |   |      |  
|Service cost                                             |  | $      | 421   |   |      | $ | 278   |      |  | $ | 184  |  
|Interest cost                                            |  |        | 732   |   |      |   | 626   |      |  |   | 315  |  
|Prior service cost                                       |  |        | 74    |   |      |   | 74    |      |  |   | 30   |  
|Amortization of prior experience
    loss                |  |        | 550   |   |      |   | 321   |      |  |   | 110  |  
|Loss recognized due to settlement                        |  |        |      |   |      |   | 1,396 |      |  |   |     |  
|                                                         |  |        |       |   |      |   |       |      |  |   |      |  
|Net periodic benefit cost                                |  | $      | 1,777 |   |      | $ | 2,695 |      |  | $ | 639  |  
|                                                         |  |        |       |   |      |   |       |      |  |   |      |  
|WEIGHTED-AVERAGE ASSUMPTIONS USED:                       |  |        |       |   |      |   |       |      |  |   |      |  
|Discount rate to determine benefit
    obligations       |  |        | 5.50  | % |      |   | 5.25  | %    |  |   | 6.00 | %
|Discount rate to determine net
    periodic pension cost |  |        | 5.25  | % |      |   | 6.00  | %    |  |   | 6.75 | %
|Rate of compensation increase                            |  |        | 4.50  | % |      |   | 4.50  | %    |  |   | 4.50 | %

















|    |                             
|--- | ----------------------------
|12. | Stock
    Repurchase Program





40



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##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






|    |                 
|--- | ----------------
|13. | Income
    Taxes







|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|--------------- |  | ------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  |  |  | 
|                |  | Fiscal |       
|                |  | 2005   |        |  | 2004 |   |        | 2003 |  |   |        | 
|               
|Current:        |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|Federal         |  | $      | 39,360 |  |      | $ | 42,728 |      |  | $ | 23,966 |  |  |  |  | 
|State and local |  |        | 9,687  |  |      |   | 8,119  |      |  |   | 4,332  |  |  |  |  | 
|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|                |  |        | 49,047 |  |      |   | 50,847 |      |  |   | 28,298 |  |  |  |  | 
|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|Deferred:       |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|Federal         |  |        | 5,026  |  |      |   | 2,035  |      |  |   | 5,178  |  |  |  |  | 
|State and local |  |        | 1,074  |  |      |   | 374    |      |  |   | 1,226  |  |  |  |  | 
|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|                |  |        | 6,100  |  |      |   | 2,409  |      |  |   | 6,404  |  |  |  |  | 
|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 
|                |  | $      | 55,147 |  |      | $ | 53,256 |      |  | $ | 34,702 |  |  |  |  | 
|                |  |        |        |  |      |   |        |      |  |   |        |  |  |  |  | 









|                                                    |  |        |      |   |      |  |      |      |  |  |      |  
|--------------------------------------------------- |  | ------ | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                                    |  | Fiscal |     
|                                                    |  | 2005   |      |   | 2004 |  |      | 2003 | 
|                                                   
|Federal statutory rate                              |  |        | 35.0 | % |      |  | 35.0 | %    |  |  | 35.0 | %
|Increase (decrease) in tax
    resulting from:      |  |        |      |   |      |  |      |      |  |  |      |  
|State income taxes, net of federal
    tax benefits |  |        | 4.9  |   |      |  | 4.0  |      |  |  | 4.1  |  
|Other                                               |  |        | (0.3 | ) |      |  | (0.2 | )    |  |  | (0.1 | )
|                                                    |  |        |      |   |      |  |      |      |  |  |      |  
|Effective rate                                      |  |        | 39.6 | % |      |  | 38.8 | %    |  |  | 39.0 | %
|                                                    |  |        |      |   |      |  |      |      |  |  |      |  









|                                          |  |             |         |   |             |   |         |  
|----------------------------------------- |  | ----------- | ------- | - | ----------- | - | ------- | -
|                                          |  | January 28, |         |   | January 29, |  
|                                          |  | 2006        |         |   | 2005        |  
|                                         
|Current:                                  |  |             |         |   |             |   |         |  
|Inventory                                 |  |             | (5,417  | ) |             |   | (1,784  | )
|Other                                     |  |             | 222     |   |             |   | 891     |  
|                                          |  |             |         |   |             |   |         |  
|Total current liabilities                 |  | $           | (5,195  | ) |             | $ | (893    | )
|                                          |  |             |         |   |             |   |         |  
|Non-current:                              |  |             |         |   |             |   |         |  
|Furniture, equipment and
    improvements |  |             | (13,886 | ) |             |   | (11,358 | )
|Deferred rent and tenant allowances       |  |             | 7,636   |   |             |   | 8,177   |  
|SERP                                      |  |             | 2,847   |   |             |   | 1,840   |  
|Other                                     |  |             | 1,174   |   |             |   | (10     | )
|Valuation allowances                      |  |             | (426    | ) |             |   |        |  
|                                          |  |             |         |   |             |   |         |  
|Total non-current liabilities             |  |             | (2,655  | ) |             |   | (1,351  | )
|                                          |  |             |         |   |             |   |         |  
|Net deferred income tax liabilities       |  | $           | (7,850  | ) |             | $ | (2,244  | )
|                                          |  |             |         |   |             |   |         |  







41



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##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)








|    |                                  
|--- | ---------------------------------
|14. | Commitments
    and Contingencies











|                   |  |       |         | 
|------------------ |  | ----- | ------- | 
|Due in Fiscal Year |  | Total |        
|                  
|2006               |  | $     | 65,759  | 
|2007               |  |       | 66,145  | 
|2008               |  |       | 66,323  | 
|2009               |  |       | 64,225  | 
|2010               |  |       | 58,968  | 
|Thereafter         |  |       | 185,211 | 
|                   |  |       |         | 
|Total              |  | $     | 506,631 | 
|                   |  |       |         | 









|                     |  |        |        |  |      |   |        |      |  |   |        | 
|-------------------- |  | ------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                     |  | Fiscal |       
|                     |  | 2005   |        |  | 2004 |   |        | 2003 | 
|                    
|Minimum rentals      |  | $      | 61,681 |  |      | $ | 49,481 |      |  | $ | 40,086 | 
|Contingent rentals   |  |        | 10,376 |  |      |   | 8,704  |      |  |   | 5,683  | 
|Office space rentals |  |        | 1,207  |  |      |   | 1,159  |      |  |   | 1,068  | 





Employment Agreements




Legal Proceedings




Event Sponsorship Agreement




Guarantees


42



---



##### Table of Contents





AÉROPOSTALE,
    INC.




NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)






|    |                                                  
|--- | -------------------------------------------------
|15. | Selected
    Quarterly Financial Data (Unaudited)







|                           |  |                      |         |  |          |   |         |             |  |   |             |  |  |   |         | 
|-------------------------- |  | -------------------- | ------- |  | -------- | - | ------- | ----------- |  | - | ----------- |  |  | - | ------- | 
|                           |  | Thirteen Weeks Ended |        
|                           |  | April 30,            |         |  | July 30, |   |         | October 29, |  |   | January 28, | 
|                           |  | 2005                 |         |  | 2005     |   |         | 2005        |  |   | 2006        | 
|                          
|Fiscal 2005                |  |                      |         |  |          |   |         |             |  |   |             |  |  |   |         | 
|Net sales                  |  | $                    | 211,674 |  |          | $ | 232,770 |             |  | $ | 324,657     |  |  | $ | 435,246 | 
|Gross profit               |  |                      | 59,771  |  |          |   | 62,027  |             |  |   | 94,719      |  |  |   | 145,958 | 
|Net income                 |  |                      | 8,614   |  |          |   | 7,449   |             |  |   | 26,085      |  |  |   | 41,806  | 
|Basic earnings per share   |  |                      | 0.16    |  |          |   | 0.13    |             |  |   | 0.48        |  |  |   | 0.77    | 
|Diluted earnings per share |  |                      | 0.15    |  |          |   | 0.13    |             |  |   | 0.47        |  |  |   | 0.76    | 





|                           |  |                      |         |  |          |   |         |             |  |   |             |  |  |   |         | 
|-------------------------- |  | -------------------- | ------- |  | -------- | - | ------- | ----------- |  | - | ----------- |  |  | - | ------- | 
|                           |  | Thirteen Weeks Ended |        
|                           |  | May 1,               |         |  | July 31, |   |         | October 30, |  |   | January 29, | 
|                           |  | 2004                 |         |  | 2004     |   |         | 2004        |  |   | 2005        | 
|                          
|Fiscal 2004                |  |                      |         |  |          |   |         |             |  |   |             |  |  |   |         | 
|Net sales                  |  | $                    | 167,654 |  |          | $ | 194,852 |             |  | $ | 274,616     |  |  | $ | 327,090 | 
|Gross profit               |  |                      | 49,107  |  |          |   | 59,486  |             |  |   | 98,201      |  |  |   | 113,113 | 
|Net income                 |  |                      | 6,261   |  |          |   | 10,897  |             |  |   | 31,686      |  |  |   | 35,268  | 
|Basic earnings per share   |  |                      | 0.11    |  |          |   | 0.20    |             |  |   | 0.57        |  |  |   | 0.63    | 
|Diluted earnings per share |  |                      | 0.11    |  |          |   | 0.19    |             |  |   | 0.55        |  |  |   | 0.62    | 







43



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##### Table of Contents



|        |                                                                                            
|------- | -------------------------------------------------------------------------------------------
|Item 9. | Changes
    in and Disagreements with Accountant on Accounting and Financial
    Disclosure







|         |                            
|-------- | ---------------------------
|Item 9A. | Controls
    and Procedures



Managements
    Report On Internal Control Over Financial
    Reporting




Rules 13a-15(f) 15d-15(f)








Internal
    Control  Integrated Framework.




Form 10-K.




Evaluation
    of Disclosure Controls and Procedures




Rule 13a-15(b) Rule 13a-15(e)




Changes
    in Internal Controls over Financial Reporting








|         |                      
|-------- | ---------------------
|Item 9B. | Other
    Information





44



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##### Table of Contents

PART III

|         |                                                       
|-------- | ------------------------------------------------------
|Item 10. | Directors
    and Executive Officers of the Registrant







|         |                           
|-------- | --------------------------
|Item 11. | Executive
    Compensation







|         |                                                                       
|-------- | ----------------------------------------------------------------------
|Item 12. | Security
    Ownership of Certain Beneficial Owners and
    Management







|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain
    Relationships and Related Transactions







|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal
    Accountant Fees and Services







PART IV




|         |                                               
|-------- | ----------------------------------------------
|Item 15. | Exhibits
    and Financial Statement Schedules



| |        |                                                                                                                                                                   
| | ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) 1. | The financial statements listed in the Index to
    Consolidated Financial Statements at page 24 are
    filed as a part of this Annual Report on
    Form 10-K.



| |    |                                                                                                                                                                     
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. | Financial statement schedules are omitted because they are not
    applicable or the required information is shown in the financial
    statements or notes thereto.
|
| | 3. | Exhibits included or incorporated herein:                                                                                                                           





45



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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description3
.1

Form of Amended and Restated
    Certificate of Incorporation.3
.2

Form of Amended and Restated
    By-Laws.4
.1

Specimen Common Stock
    Certificate.4
.2

Stockholders Agreement,
    dated as of August 3, 1998, by and among MSS-Delaware,
    Inc., MSS Acquisition Corp. II, Federated Specialty Stores,
    Inc., Julian R. Geiger, David R. Geltzer and John S. Mills.10
.1

Aéropostale, Inc. 1998 Stock
    Option Plan.10
.2

Aéropostale, Inc. 2002
    Long-Term Incentive Plan.10
.3

Management Services Agreement,
    dated as of July 31, 1998, between MSS-Delaware, Inc. and
    MSS Acquisition Corp. II.10
.4

Loan and Security Agreement, dated
    July 31, 1998 between Bank Boston Retail Finance Inc., as
    agent for the lenders party thereto (the Lenders),
    the Lenders and MSS-Delaware, Inc.10
.5

First Amendment to Loan and
    Security Agreement, dated November 8, 1999, by and between
    Bank Boston Retail Finance Inc., as agent for the Lenders, the
    Lenders and MSS-Delaware, Inc.10
.6

Second Amendment to Loan and
    Security Agreement, dated May 2, 2002, by and between Fleet
    Retail Finance Inc. (f/k/a Bank Boston Retail Finance), as agent
    for the Lenders, the Lenders and Aéropostale, Inc. (f/k/a
    MSS-Delaware, Inc.).10
.7

Third Amendment to Loan and
    Security Agreement, dated June 13, 2001, by and between
    Fleet Retail Finance Inc. (f/k/a Bank Boston Retail Finance), as
    agent for the Lenders, the Lenders and Aéropostale, Inc.
    (f/k/a MSS-Delaware, Inc.).10
.8

Fourth Amendment to Loan and
    Security Agreement, dated February 2, 2002, by and between
    Fleet Retail Finance Inc. (f/k/a Bank Boston Retail Finance), as
    agent for the Lenders, the Lenders and Aéropostale, Inc.
    (f/k/a MSS-Delaware, Inc.).10
.9

Sublease Agreement, dated
    February 5, 2002, between the United States Postal Services
    and Aéropostale, Inc.10
.10

Merchandise Servicing Agreement,
    dated April 1, 2002, between American Distribution, Inc.
    and Aeropostale, Inc.*10
.11

Interim Merchandise Servicing
    Agreement, dated as of February 11, 2002, by and between
    American Consolidation Inc. and Aéropostale, Inc.10
.12

Sourcing Agreement, dated
    July 22, 2002, by and among Federated Department Stores,
    Inc., Specialty Acquisition Corporation and Aéropostale,
    Inc.10
.13

Fifth Amendment to Loan and
    Security Agreement, dated April 15, 2002, by and between
    Fleet Retail Finance Inc. (f/k/a Bank Boston Retail Finance), as
    agent for the Lenders, the Lenders and Aéropostale, Inc.
    (f/k/a MSS-Delaware, Inc.).10
.14

Amendment No. 1 to
    Stockholders Agreement, dated April 23, 2002, by and
    among Aéropostale, Inc., Bear Stearns MB
    1998-1999
    Pre-Fund, LLC and Julian R. Geiger.10
.15

Employment Agreement, dated as of
    February 1, 2002, between Aéropostale, Inc. and Julian
    R. Geiger.10
.16

Employment Agreement, dated
    February 1, 2002, between Aéropostale, Inc. and
    Christopher L. Finazzo.10
.17

Employment Agreement, dated
    February 1, 2002, between Aéropostale, Inc. and John
    S. Mills.10
.18

Fifth Amendment to Loan and
    Security Agreement, dated October 7, 2003, by and between
    Fleet Retail Finance Inc. (f/k/a Bank Boston Retail Finance), as
    agent for the Lenders, the Lenders and Aéropostale, Inc.
    (f/k/a MSS-Delaware, Inc).10
.19

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and Julian
    R. Geiger.10
.20

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and
    Christopher L. Finazzo.10
.21

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and John
    S. Mills. 46




---



##### Table of Contents



ExhibitNo.

Description10
.22

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and
    Michael J. Cunningham.10
.23

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and Thomas
    P. Johnson.10
.24

Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and
    Olivera
    Lazic-Zangas.10
.25

Amendment No. 1, dated as of
    April 11, 2005, to Employment Agreement, dated as of
    February 1, 2004, between Aéropostale, Inc. and Julian
    R. Geiger.21


Subsidiaries of the Company.*23
.1

Consent of Deloitte &
    Touche LLP.*31
.1

Certification by Julian R. Geiger,
    Chairman and Chief Executive Officer, pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.*31
.2

Certification by Michael J.
    Cunningham, Executive Vice President and Chief Financial
    Officer, pursuant to Section 302 of the Sarbanes-Oxley Act
    of 2002.*32
.1

Certification by Julian R. Geiger
    pursuant to 18 U.S.C. Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*32
.2

Certification by Michael J.
    Cunningham pursuant to 18 U.S.C. Section 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002.*     *
    
    Filed herewith.
    
    Incorporated by reference to the Registration Statement on
    Form S-1,
    originally filed by Aéropostale, Inc. on March 8, 2002
    (Registration
    No. 333-84056).
    
    Incorporated by reference to the Registrants Annual Report
    on 10-K, for
    the fiscal year ended February 1, 2003 (File
    No. 001-31314).
    
    Incorporated by reference to the Registrants Quarterly
    Report on
    Form 10-Q,
    for the quarterly period ended November 1, 2003 (File
    No. 001-31314).
    
    Incorporated by reference to the Registrants Annual Report
    on Form
    10-K, for
    the fiscal year ended January 31, 2004 (File
    No. 001-31314). 47




---



##### Table of Contents



SIGNATURES      By:
    /s/  Julian
    R. Geiger    Chairman, Chief Executive Officer, and Director
      Signature

Title

Date/s/  Julian
    R. GeigerJulian
    R. Geiger

Chairman, Chief Executive
    Officer, and Director
    (Principal Executive Officer)

April 5, 2006/s/  Michael
    J. CunninghamMichael
    J. Cunningham

Executive Vice President
    and Chief Financial Officer
    (Principal Financial Officer)

April 5, 2006/s/  Alan
    C. SiebelsAlan
    C. Siebels

Vice
    President  Controller
    (Principal Accounting Officer)

April 5, 2006/s/  Bodil
    ArlanderBodil
    Arlander

Director

April 5, 2006/s/  Ronald
    BeegleRonald
    Beegle

Director

April 5, 2006/s/  Mary
    Elizabeth BurtonMary
    Elizabeth Burton

Director

April 5, 2006/s/  Robert
    B. ChavezRobert
    B. Chavez

Director

April 5, 2006/s/  David
    EdwabDavid
    Edwab

Director

April 5, 2006/s/  John
    D. HowardJohn
    D. Howard

Director

April 5, 2006/s/  Karin
    Hirtler  GarveyKarin
    Hirtler  Garvey

Director

April 5, 2006/s/  David
    B. VermylenDavid
    B. Vermylen

Director

April 5, 2006  48




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##### Table of Contents



AÉROPOSTALE,
    INC.
  SCHEDULE II
    VALUATION AND QUALIFYING ACCOUNTS
  Balance Beginning


Amounts Charged


Write-offs Against


Balance EndReserve for Returns:

of Period


to Net Income


Reserve


of Period(In thousands)Year Ended January 28, 2006

$
525


$
620


$
491


$
654Year Ended January 29, 2005


672



233



380



525Year Ended January 31, 2004


418



526



272



672  49