American Eagle Outfitters Inc. ( AEO ), a
leading specialty retailer, recently raised its earnings outlook
for the second-quarter of fiscal 2012 on the back of
better-than-expected sales experienced by it during the period.
Management believes that the increased revenues were the results of
improvements across product assortments and company-owned brands,
together with better sales in its areas of operations.
Driven by strong sales, American Eagle's second-quarter
comparable sales climbed 9%, resulting in total sales increase of
11% to $740 million compared with $669 million in the year-ago
quarter. Moreover, quarterly sales also exceeded the Zacks
Consensus estimated sales of $735 million.
Further, better-than-expected top-line performance and lower
promotional expenses, encouraged management to raise its
second-quarter earnings guidance range. The company now expects
earnings for the quarter to be in the range of 19-21 cents per
share, reflecting an increase of 46%-62% compared with the
prior-year quarter earnings of 13 cents. Earlier, the company has
forecasted earnings to lie between 13-15 cents.
The Zacks Consensus Estimate for second quarter profit, which
currently stands at 21 cents per share, was 15 cents per share
prior to the announcement of the preliminary results.
Management revealed that the company managed to bring down its
promotional expenses while sustaining the improvement in average
traffic and transaction. Going forward, management aims to provide
better returns to the shareholders through delivering consistent
performance in the long term.
American Eagle is expected to release its financial results for
second-quarter of fiscal 2012 on Wednesday, August 22, 2012. The
company will announce the third-quarter 2012 outlook along with the
second-quarter financial results.
American Eagle now plans to focus more on merchandise
assortments, adding more compelling brands, managing inventory
level much diligently and augmenting e-commerce business. Further,
in order to emphasize more on the core business while generating
the best possible return for shareholders, the company has decided
to exit its children's brand, 77Kids.
We remain impressed with the company's continued momentum in
denim along with improved merchandise assortments in the women's
business segment, which will likely augment its top-line
performance as well as enhance the gross margin.
Moreover, we believe that American Eagle's cost-saving
initiatives and long-term growth strategy will not only provide
financial flexibility, but will also help to drive value
proposition. In a drive to boost its bottom line, the company is
relentlessly focusing on initiatives to cut down costs through
supply chain efficiencies and updated product allocation
American Eagle, which competes with Abercrombie &
Fitch Co. ( ANF ) and Gap Inc. ( GPS ),
carries a Zacks #2 Rank, translating into short-term Buy rating for
the next 1-3 months. Moreover, we maintain our long-term Outperform
recommendation on the stock.
AMER EAGLE OUTF (AEO): Free Stock Analysis
ABERCROMBIE (ANF): Free Stock Analysis Report
GAP INC (GPS): Free Stock Analysis Report
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