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American Eagle Takes Flight

Just when it looked as though shoppers would be staying away from malls for the most part, here comes teen-oriented retailer American Eagle (NYSE: AEO  ) with surprisingly strong sales gains. Although the Street has ignored this retailer's impressive fundamentals, at least two Fools saw the tremendous value in American Eagle. While Seth Jayson hoped the Street would remain ignorant and create an even bigger value (knowing full well it would soar again), Tim Hanson knew it was priced to move.

Well, Seth, I hoped you took advantage and scooped up more shares while you had the chance, because the Street has finally caught on. After reporting comps yesterday that flew past estimates, investors scooped up American Eagle stock, pushing its price nearly 8% higher after hours. Until then, the stock price had fallen 23.7% since its high back in January.

The buying spree occurred after American Eagle reported an increase in total sales of 15% to $270.2 million in June. Even better, in my view anyway, was its 8% increase in comps, which was on top of last June's 11% comps growth.

The recent performance at American Eagle has been somewhat stronger than those of its closest competitors, including Aeropostale (NYSE: ARO  ) and Abercrombie & Fitch (NYSE: ANF  ) , which reported comps growth of 0.2% and 2%, respectively. If its new offerings, including Martin + Osa and aerie, prove popular, its performance should improve further. Additionally, the company is running a jeans promotion at the end of the month that should lure back-to-school shoppers into stores.

After last night's action, American Eagle is not the value it was just a short time ago. However, investors looking for a highflier with a history of beating the market should take a close look at American Eagle to see whether it's just beginning to gain altitude.

To find out how a couple of teen-based retailers have performed, check out:

American Eagle is part of the Stock Advisor recommendation roster. Find out why with a free, 30-day trial of the market-beating newsletter service.

Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article. The Fool has a disclosure policy.

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10/25/2016 4:01 PM
AEO $16.87 Up +0.07 +0.42%
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