American Eagle Takes Off Again

American Eagle Outfitters (NYSE: AEO) shares took wing today on the company's fourth-quarter results -- quite a turnabout, after the stock got brutally shot down just a few days ago.

Fourth-quarter net income dropped 6.5% to $140.5 million, or $0.66 per share. Revenue increased 2.2% to $995.4 million; when you strip out the extra week in the fourth quarter of 2006, revenue jumped 7%. Same-store sales decreased 2%. Gross margin declined to 45.7% of sales, from 47.9% this time last year, as the company resorted to higher markdowns to move merchandise. The damage was partially offset by lower product costs.

This Motley Fool Stock Advisor pick is hardly alone in contending with the fourth quarter's slow consumer spending environment.  Last week shed further light on retail's current tough times, as we witnessed a frosty February for retailers like Chico's (NYSE: CHS), Limited (NYSE: LTD), and Gap (NYSE: GPS). Even Abercrombie & Fitch (NYSE: ANF) had a downer month. (Aeropostale (NYSE: ARO) provided a rare and notable exception to February's gloom.)

However, American Eagle Outfitters is currently trading at only 10 times trailing earnings, which certainly sounds like a bargain price for a retailer that may have slowed down somewhat in recent months. Sluggish or not, American Eagle strikes me as a quality business with plenty of growth potential, a popular brand, cash on the balance sheet, and no debt. A 41% drop in the company's stock price over the last 12 months seems quite overdone, and a great opportunity for long-term investors. 

Shop for some related Foolishness:

• American Eagle Outfitters was nominated as a Black Friday Bargain Stock.
• American Eagle's also betting on eaglets.
• In January, the retailer took to the skies.