Following the announcement of first-quarter preliminary sales
results, the shares of specialty retailer,
American Eagle Outfitters Inc.
), are trading at $20.02 per share, registering a year-to-date
increase of approximately 32% from the closing price of $15.19 as
of December 30, 2012.
Driven by strong spring season sales, American Eagle's
first-quarter comparable sales climbed 17%, resulting in a total
sales increase of 18% to $719 million compared with $610 million in
the year-ago quarter. Moreover, quarterly sales also beat the Zacks
Consensus estimated sales of $708 million.
Further, better-than-expected top-line performance and lower
promotional expenses, motivated management to raise its
first-quarter earnings guidance range. The company now expects
earnings for the quarter to be in the range of 18 cents to 20 cents
per share, instead of 8-10 cents forecasted earlier.
The Zacks Consensus Estimate, which currently stands at 20 cents
per share, was 10 cents per share prior to the announcement of
For fiscal 2012, on the back of low-to-mid single-digit increase
in comparable sales, the company anticipates earnings in the range
of $1.06 to $1.12 per share, up 23%-30% from the previous fiscal
adjusted earnings of 86 cents per share. The Zacks Consensus
Estimate, which currently stands at $1.16 per share, was $1.08 per
share prior to the announcement of preliminary results.
Moreover, American Eagle revealed its plan to focus on inventory
control measures and improvement of operational efficiency to
further boost its bottom line. The company will announce its
first-quarter results before the market opens on Wednesday, May 23,
American Eagle is one of the leading specialty retailers of
fashionable and stylish apparels and accessories in the United
States and Canada. The company has a strong portfolio of
well-established brands, each of which is focused on the unique
characteristics and rapidly changing preferences of its target
In a drive to boost its bottom line, American Eagle continues to
take initiatives to reduce cost through supply chain efficiencies
and updated product-allocation systems. We believe that these
initiatives along with the long-term growth strategy of opening
stores in the Middle East and developing economies like India and
China will help drive value proposition.
Moreover, the company's continued momentum in denim along with
improved merchandise assortments in the women's business segment is
likely to enhance its top line while improving its gross
However, American Eagle's business is seasonal in nature and
generates a high proportion of sales during the fiscal third and
fourth quarters, which are characterized by the back-to-school and
holiday seasons. Furthermore, the company ramps up its merchandise
levels in anticipation of the holiday season, exposing itself to
significant risks if the season fails to deliver impressive
Above all, American Eagle operates in a highly fragmented market
and competes with national as well as regional players.
Furthermore, apart from larger retailers such as
), American Eagle is facing increasing competition from
value-priced specialty retailers, such as
Abercrombie & Fitch Company
Currently, we are maintaining a long-term Neutral recommendation
on American Eagle. Our long-term recommendation is supported by
Zacks #3 Rank, which translates into a short-term Hold rating on
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