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American Eagle Outfitters Inc. (AEO - Analyst Report) reported disappointing preliminary sales and comps results for third-quarter fiscal 2013. Net sales for the quarter dipped 6% year over year to $857 million, while it beat the Zacks Consensus Estimate of $834 million.

Including sales from its online portal, AEO direct, the company reported a comparable store sales (comps) decline of 5% compared with a 10% rise reported in the year-ago comparable quarter. Though sales dropped due to a taxing economic environment, it benefited from a 17% rise in AEO direct sales.

Despite the soft preliminary sales results, the company raised its adjusted earnings guidance for the third quarter to 19 cents per share, against the previously forecasted EPS range of 14–16 cents. The upside in the earnings forecast is driven by expectations of better-than-anticipated margin results and clean inventory at the end of the third quarter of fiscal 2013. The current Zacks Consensus Estimate for the third quarter is pegged at 15 cents per share.

The company’s adjusted earnings exclude the previously disclosed non-cash charges related to the shutdown of a distribution center. The revised forecast also compares to the prior-year quarter adjusted earnings of 41 cents per share.

American Eagle is scheduled to release its third-quarter earnings results on Dec 6, 2013, wherein it will provide a fresh business update and fourth-quarter guidance.

Going forward, the company will continue to remain focused on enhancing its merchandising, marketing and customer service performance, while maintaining disciplined inventory and expense management.  

In second-quarter fiscal 2013, the company’s earnings declined 52.4% year over year to 10 cents per share, while it was in line with the Zacks Consensus Estimate. The year-over-year decline in earnings per share was mainly due to lower sales and higher operating expenses.

Other Stocks to Consider

Currently, American Eagle carries a Zacks Rank #5 (Strong Sell). Better performing stocks in the apparel retail industry include Finish Line Inc. (FINL - Snapshot Report), DSW Inc. (DSW - Snapshot Report) and Fifth & Pacific Companies Inc. . All of these have a Zacks Rank #2 (Buy).

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