Make no mistake, teen retailer American Eagle Outfitters
Let's call it a breather. It's hard to fault a company for failing to surpass record numbers from a year ago, and the 2% decline in September same-store sales seemed to mirror a lot of other teen retailers. Gap
The culprit behind these weak or faltering numbers seems to be the blitz of warm weather. Back-to-school season typically has us imagining crisp fall days, and we stock up on sweaters, jeans, and coats, but when you're still able to walk around in tank tops, shorts, and sandals, there's not much imperative to go to the mall to shop. Even for teens. Yet maybe that explains the 5.4% sales and 2.7% comps increase at PacSun's
Even with the disappointing month of sales, I think things don't look all that bad for American Eagle as a long-term investment. It's true the overall outlook for the economy remains sluggish, and the level of sales is really something retailers can't control. Sure, there are companies out there that were able to post rising comps, like rival Aeropostale
But this business involves cyclical economic trends that aren't always favorable to retailers. The only control a company like American Eagle really has right now is in effectively running its operations, such as adjusting inventory levels and lowering expected sales to avoid higher markdowns. And we'll be able to assess this performance when the quarterly results come out in November.
The 5% drop in net sales has American Eagle ratcheting back expectations for October and the third quarter. The company lowered its outlook for the month, as reflected in its quarterly guidance of $0.44 to $0.45 per share -- a 6% pullback of its forecast.
It's tough to go up against the rip-snorting numbers that American Eagle posted last year, but that doesn't mean this teen retailer won't prosper again. Christmas is coming, along with colder winter weather. So in the long run, I think this eagle is still climbing.
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