In a bid to boost shareholders' return,
American Eagle Outfitters Inc.
) recently announced a special cash dividend of $1.50 per share
along with its regular quarterly cash dividend of 11 cents per
share. The company has a long track record of consistently paying
quarterly dividend for more than 8 years.
Both the dividend will be paid on October 10, 2012 to the
shareholders of record as of September 26, 2012. This will bring
the annualized dividend yield to approximately 8.3%.
The announcement of special cash dividend was primarily aided by
the company's strong balance sheet position and ability to generate
excessive free cash flow. Moreover, this clearly signifies its
potential to improve continuously in the long term. The company
remains focused on maximizing its profits by constantly enhancing
its merchandise assortments and improving customer offerings.
Going ahead in 2012, the company expects its profits to grow
continually, given the right mix of products and marketing
The company lately reported a very encouraging second quarter
fiscal 2012 financial results, with earnings surging nearly 62% to
21 cents per share from 13 cents earned in the year-ago quarter.
The year-over-year growth in earnings was driven by a double-digit
growth in top line, coupled with lower input and operating
expenses. Further, during the quarter, American Eagle's net sales
went up 11% year over year to $739.7 million, primarily driven by a
9% increase in comparable store sales.
Further, American Eagle ended the quarter with cash and
short-term investments of $702 million compared with $514 million
in the year-ago period. During the first six months of fiscal 2012,
the company generated $47.7 million cash from operating activities
while it deployed $48.2 million toward capital expenditure.
Encouraged by strong second quarter fiscal 2012 results, the
company raised its earnings guidance range to $1.33 - $1.36 per
share from $1.16 - $1.22 forecasted earlier. The current Zacks
Consensus Estimate stands at $1.36 per share. The improved guidance
range is based on the company's expectation of mid-single-digit and
low-sing-digit growth in comparable store sales for third and
fourth quarters of fiscal 2012.
American Eagle now plans to focus more on merchandise
assortments, adding more compelling brands, managing inventory
level much diligently and augmenting the 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 also will help to drive value
proposition. In an effort 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.
), carries a Zacks #1 Rank, translating into short-term Strong Buy
rating for the next 1-3 months. Moreover, we maintain our long-term
'Outperform' recommendation on the stock.
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