Ah, fickle retail. After having reported earnings today, American Eagle Outfitters
American Eagle Outfitters' first-quarter earnings doubled to $55.3 million, or $0.35 per diluted share. Sales increased 36.7% to $454 million, while same-store sales increased an impressive 27.1%. Gross profit improved to 48.9% from 44.7% on a year-over-year basis.
If you've been tracking American Eagle, you know it had some problems over the last couple years, sharing sluggish sales with other teen-oriented retailers such as Abercrombie & Fitch
It sounds like the crux of the problem at hand today, though. This time last year, American Eagle began to stage its turnaround, giving it slightly more difficult comparisons this time around than it might have faced in recent months. You can read about a few more torrid quarters in 2004 here and here. If you look back, you'll see why today's news of first-quarter profit "doubling" might be perceived as disappointing to some shareholders.
However, in American Eagle's conference call, management addressed the tough comparisons and said that it has been planning for that inevitability, stating, "We know what we are up against." The company said that it has been working hard to draw in sales and boost productivity and efficiency as it faces the second half of the year and said that it feels "we have the plans in place to beat those comparisons for the back half of the year." Indeed, time will tell.
Regardless, American Eagle shares took a negative turn today, having decreased about 5% in recent trading, regardless of the fact that there don't seem to be any glaring signs of ill health on the part of this retailer, nor indications that it's out of fashion with its customers.
The stock has, after all, more than doubled in price over the course of the last year (although it is currently trading at a forward P/E of a mere 14, which may give some folks some extra food for thought), so it's hardly surprising that investors might fret over fears of slowdown and increasingly difficult year-over-year comparisons on the horizon.
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Alyce Lomax does not own shares of any of the companies mentioned.