Given today's word about American Eagle Outfitters (Nasdaq: AEOS), it was hard for me to resist typing out a headline about a soaring eagle, as cheesy as that might be. Regardless, it's still a fitting metaphor, seeing how the retailer showed investors that this mall-based Eagle isn't exactly on the endangered species list.
American Eagle's fourth-quarter earnings increased nearly threefold to $101.2 million, or $1.32 per diluted share. Sales zoomed 37% higher to $674.0 million, and same-store sales for the year were up 29%. Even more impressive, February's same-store sales clocked in 32%, which certainly does sound amazing and implies that the good times continue. The company also boosted its first-quarter earnings outlook.
Of course, what with all the euphoria, let's not lose sight of the fact that this time last year, American Eagle was floundering a bit, with net income having merely inched up by 7%. At that time, its total sales then increased a mere 5.2%, and its same-store sales declined 5.1%. Way back then, investors would have had to have weighed its chances at reinvigorating sales and boosting earnings when they made their investment decision -- a strategy that likely worked out for many.
And that's the rub with retail stocks, of course -- calling a turnaround on a retailer that's fallen out of fashion and wondering whether it's a temporary state or about to turn into an ongoing problem. After all, compare that with Gap's (NYSE: GPS) recent lackluster performance, which for the last year or so has failed to provide much of a turnaround, not to mention the troubles facing Wet Seal (Nasdaq: WTSLA).
On the other hand, stocks that have exhibited a hot trend with teens and young adults include Pacific Sunwear (Nasdaq: PSUN), which longtime Fool Rick Munarriz examined earlier today, Urban Outfitters (Nasdaq: URBN), and Aeropostale (NYSE: ARO).
If you've been shopping for mall-based investments over the last year or so and took a chance on American Eagle, your stake in that company has probably been quite satisfying during the duration. Meanwhile, it has a nice cash reserve and no debt and offers some other perks for investors, such as quarterly dividends and current plans for share buybacks. (Forget about its pending stock split, though -- Fools know that stock splits are six of one, half a dozen of the other.)
Then again, investors looking here must bear in mind that the time to get American Eagle shares on the cheap have likely come and gone. Over the course of the last year, the company's stock price has more than doubled. This Eagle may be soaring, but just how much more it can soar before its wings get clipped is the question.
Talk to other Fools about fashion sense on our What to Wear? discussion board.
Alyce Lomax does not own shares of any of the companies mentioned.
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