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Why American Eagle Outfitters Stock Rose 6% in Early Trading Today

By Reuben Gregg Brewer – Nov 23, 2021 at 12:45PM

Key Points

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The basics retailer got a boost from a record-breaking third quarter, but there were two other bits of news that helped, too.

What happened

Shares of teen apparel retailer American Eagle Outfitters (AEO -3.17%) rose roughly 6% as Wall Street opened for trading on Tuesday. Around 90 minutes into the trading day, that gain had dipped a bit, to around 4%, but the more interesting story here is that peers Abercrombie & Fitch and Urban Outfitters both witnessed sharp declines in early trading today. The difference was actually kind of subtle, given that all three companies posted solid top- and bottom-line third quarter earnings numbers.

So what

American Eagle Outfitters had sales of $1.27 billion in the third quarter of 2021, up 24% from a year ago and 19% from 2019, before the pandemic. Notably, sales at the retailer's Aerie nameplate, which it is counting on to drive growth, rose 28% year over year in 2021 after posting 34% growth the prior year. Meanwhile, sales at its namesake brand bounced back, up 21% following an 11% decline year over year between 2020 and 2019.

So overall, the company is performing fairly well as it looks to revitalize its business. Earnings per share came in at $0.74 compared to $0.32 a year ago and $0.48 in 2019.

Teens with shopping bags walking on a street.

Image source: Getty Images.

But posting strong top and bottom line results didn't save Abercrombie & Fitch or Urban Outfitters from stock declines today. The difference with American Eagle Outfitters is likely twofold. First, as noted, the retailer is working to get its business back on a growth track. That includes pushing the Aerie brand, which is still growing strongly, and turning the American Eagle brand around, which seems to be what happened given the year-over-year sales uptick in the division.

But there's also American Eagle Outfitters' push into the logistics space as a way to better control its distribution and costs. Abercrombie & Fitch and Urban Outfitters both cited logistics as a headwind while American Eagle has taken action to turn it into a tailwind, noting that one of its recent acquisitions in the logistics space also provides services to other retailers. 

Now what

On the one hand, American Eagle Outfitters is facing all the same pluses and minuses as its peers. But it has achieved notable success turning around an ailing business and continuing to grow an up-and-coming brand. And on top of that, it is taking proactive steps to deal with logistics issues that are causing havoc throughout the retail sector. All in, investors thought that was a better update than what American Eagle's peers had to offer this morning.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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