American Eagle Outfitters Earnings: What to Expect Tuesday

Retailers have struggled through a tough holiday season, and investors are bracing for the worst with American Eagle. Will their fears come true?

Mar 10, 2014 at 11:53AM

American Eagle Outfitters (NYSE:AEO) will release its quarterly report on Tuesday, and investors expect to see the impact of a tough holiday quarter on the teen retailer's earnings. Even though the damage likely won't be as bad as most expect from Aeropostale (NYSE:ARO), investors hope that American Eagle can produce the strong positive surprise that Abercrombie & Fitch (NYSE:ANF) gave its shareholders in its earnings report.

The teen-retail environment has become cutthroat from a competitive standpoint, as American Eagle, Abercrombie, Aeropostale, and a host of other players in the industry strive to earn the loyalty of teen shoppers. Yet recently, times have gotten even harder for the retail group, as the most recent holiday season included widespread promotional discounting and margin-crushing efforts to clear inventory even at much lower prices in some cases. What will the net effect of this trend be on American Eagle? Let's take an early look at what's been happening with American Eagle Outfitters over the past quarter and what we're likely to see in its report.


Stats on American Eagle Outfitters

Analyst EPS Estimate


Change From Year-Ago EPS


Full-Year 2013 Revenue Estimate

$1.04 billion

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will American Eagle earnings bounce back?
In recent months, analysts have gotten much less optimistic about American Eagle Outfitters earnings, cutting January-quarter estimates by a dime per share and projections for the current fiscal year by about 15%. The stock has mirrored that bad news, falling 11% since early December.

We've already gotten a sense of how American Eagle's holiday quarter went, with the company having said in January that the key nine-week period ending January 4 showed a 7% decrease in same-store sales. The retailer also guided earnings to the lower end of its previously expected range, with comments about the highly promotional environment that mimic what Abercrombie, Aeropostale, and others have said about the holiday quarter.

But the departure of CEO Robert Hanson in January was even more troubling, as it came without much warning. For American Eagle, having to find new leadership is just another hurdle for the retailer to overcome, although it does potentially set the stage for a transformative change in strategy if the company wants to move in another direction. The grittier Urban Outfitters (NASDAQ:URBN) could provide one model to follow, as it managed to boost holiday sales by 6% on a 1% increase in comps on the strength of its more distinctive approach to merchandise selection and marketing.

One question American Eagle investors have is whether activist investors might take a bigger interest in the company. So far, rival Abercrombie has attracted a lot of activist attention, with criticism directed at Abercrombie CEO Mike Jeffries and an impending proxy battle from hedge fund Engaged Capital. American Eagle might learn some lessons from Abercrombie's experience, as both have struggled lately to connect with fashion-conscious shoppers.

Still, American Eagle is making efforts to boost sales. Its aerie Real campaign is designed to poke back at Abercrombie and some of the controversy it has seen lately, as the American Eagle lingerie division features un-airbrushed models of all sizes to market to "the real you." If American Eagle can capitalize on the flak that Abercrombie has taken about its lack of plus-size offerings, it could prove a useful differentiator in the competitive industry.

In the American Eagle earnings report, watch to see how the retailer is handling its leadership transition. Without a quick but constructive resolution to the leadership vacuum, American Eagle will have trouble keeping up in a rapidly changing competitive environment.

Find a prettier stock
Don't settle for a stock you're not sure about. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those rare stocks that could make you truly rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Click here to add American Eagle Outfitters to My Watchlist, where you can find all of our Foolish analysis on it and all your other stocks.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Urban Outfitters. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information