Why American Eagle Shares Flew

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of teen apparel retailer American Eagle Outfitters (NYSE: AEO  ) flew 10% this morning after its quarterly update topped Wall Street expectations.

So what: The stock has slumped in 2013 on sluggish teen spending, but upbeat guidance for the third quarter suggests that the worst is behind it. While revenue will be down about 6% to $857 million, it's far better than the 12% top-line decline that rival Abercrombie & Fitch reported yesterday, suggesting that American Eagle's competitive position is actually strengthening in the weak environment.

Now what: Management now sees Q3 adjusted EPS of $0.19, up significantly from its prior view of $0.14 to $0.16. "[I]n an extremely challenging environment, our bottom line results are slightly ahead of our prior expectations and we ended the period with clean inventory," CEO Robert Hanson said. "We remain highly focused on strengthening our merchandising, marketing and customer service execution, while maintaining disciplined inventory and expense management." More important, with American Eagle shares still off nearly 30% from its 52-week highs and trading at a forward P/E in the low teens, there's room for shareholders to benefit from that improvement. 

Two more tasty retail picks
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.


Read/Post Comments (1) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 07, 2013, at 11:50 AM, aeosfool wrote:

    AEO has excellent management and an excellent balance sheet(despite returning huge amounts to shareholders over the past few years) that can easily ride out any bumps in the road. Much more important than the 20% bump up in guidance for this quarter is the fact that their inventory is "clean". The real money is made in the 4th quarter and if you are selling 1/2 price fall merchandise instead of full price winter stuff at Christmas your earnings would be handicapped for the most important quarter. From what I read, this is the problem ANF faces.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2716769, ~/Articles/ArticleHandler.aspx, 12/21/2014 8:02:30 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement