What happened

Shares of American Eagle Outfitters (NYSE:AEO) jumped in November as the teen-focused apparel retailer reassured investors with a solid earnings report. It was also buoyed by positive vaccine news. According to data from S&P Global Market Intelligence, the stock finished last month up 31%.

As you can see from the chart below, the stock's gains came consistently over the course of the month. 

AEO Chart

AEO data by YCharts

So what

American Eagle has been one of the best-performing brick-and-mortar apparel retailers this year as the company's Aerie sub-brand, which sells intimates, has been a source of strength, especially online. 

Investors also responded warmly to news about positive vaccine trials from Pfizer/BioNTechModerna, and AstraZeneca. In fact, the stock's three biggest daily gains came as each company reported phase 3 results. As a brick-and-mortar retailer, the company will benefit from the end of the pandemic as teens and young adults return to social activities.

An American Eagle Outfitters storefront.

Source: American Eagle.

The company's third-quarter earnings report seemed to lock in those gains as American Eagle delivered solid results in a challenging environment. Overall revenue fell 3% in the period to $1.03 billion, in line with estimates, but there were many bright spots in the report. Aerie saw 34% overall revenue growth and record profits, while digital revenue rose 29%, up 83% at Aerie and 11% at American Eagle.

On the bottom line, adjusted operating income was flat, but adjusted earnings per share fell from $0.48 to $0.35 due to higher taxes and interest expense as well as share dilution from a convertible debt offering.

CEO Jay Schottenstein summed up the quarter, saying, "Once again, Aerie delivered outstanding results, demonstrating the power of this incredible brand and the massive opportunity ahead. Across AE and Aerie, higher full-price selling led to strong margins, reflecting merchandise quality, inventory optimization and our enduring brands."

Now what

American Eagle investors got some more good news early in December as the company said it would reinstate its quarterly dividend of $0.1375 per share, indicating its confidence that the cash crunch that led to the payout suspension is over. Schottenstein also said that holiday trends were strong starting in November. That suggests the company was well-positioned for the holiday quarter, though it didn't provide guidance.

American Eagle shares are now up 33%, indicating the recovery may already be priced in. Still, Aerie is one of the most exciting stories in brick-and-mortar retail today and deserves investor attention.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.