Shares of American Eagle Outfitters Inc.AEO soared 7.86% yesterday after it announced the acquisition of Tailgate Clothing Company and simultaneously raised its earnings per share forecast for the third quarter of fiscal 2015.
American Eagle revealed that the acquisition of Tailgate Clothing Company add two new brands to its portfolio, namely Tailgate and Todd Snyder New York. The acquisition, valued at $11 million, was made through cash and stock.
Tailgate is a classic, sports-related apparel brand with a college town store concept, which has a more localized approach. This brand incorporates style and quality with regular college-wear. On the other hand, Todd Snyder New York is a premium menswear brand. While the Tailgate brand sells its merchandise through the first college town store in Iowa City, IA and at www.tailgateclothing.com, Todd Snyder New York is available at certain department stores and boutiques, and at ToddSnyder.com.
American Eagle expects the addition of these brands to bring new business opportunities, navigating the company toward its goal of driving sustained momentum and profitability. Further, the company indicated that capital investments in these brands will be paced out, following a test and scale approach depending on profit growth and return on investment.
The acquisition brought along new senior management to the company, including Founder and Creative Director, Todd Snyder as Executive Vice President, and Jimmy Olsson as Vice President. Todd Snyder will report to Chad Kessler, Global Brand President of American Eagle.
Todd Snyder has a formidable experience in the retail apparel industry, having worked with Polo Ralph Lauren RL as a Designer for over two decades, with Gap Inc. GPS as Director of Menswear and at J. Crew as Senior Vice President of Menswear. Later, he went on to launch the Tailgate brand in 1997 and the Todd Snyder New York brand in 2011.
Coming to American Eagle's update on its third-quarter results, which are scheduled to release on Dec 2, the company stated that comparable-store sales (comps) for the quarter rose 9%. Further, the company raised its earnings per share forecast to nearly 34 cents, compared with its previous guidance of 28-31 cents. The revised guidance reflects 55% growth from 22 cents per share reported in the prior-year quarter.
Throwing more light on the third quarter, the company revealed that it remains encouraged by the positive response to its AE and Aerie brands, despite a challenging retail backdrop. Moreover, the quarter demonstrated a decline in promotional activity and more full-price selling, resulting in improvement in profit margins. This keeps the company optimistic about the upcoming holiday season.
American Eagle currently has a Zacks Rank #3 (Hold). A better-ranked stock in the same industry is L Brands Inc. LB with a Zacks Rank #2 (Buy).
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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