American Eagle's Holiday Comps Up

Clothing retailer American Eagle Outfitters Inc. (AEO - Analyst Report) achieved robust same store results for the holiday shopping season between November and December. The company’s comparable store sales for the two month period ended December 31, 2011, rose 12% as shoppers responded favorably to the company’s assortments and promotional events. This compares to a 7% decrease recorded in the year-ago period.

Owing to the support of shoppers, American Eagle registered a 15% increase in total sales for November and December. Sales numbers for the period reached $887 million compared to $771 million for the same period last year.

The holiday season at American Eagle started on a promising note registering a near 20% rise in comparable store sales for November. Robust sales during the Thanksgiving weekend and improved unit sales guided the November comps increase.

While November ended strong, the company resorted to an aggressive promotion strategy to check competition in the final two weeks of December. Despite the pressure on margins, the promotions benefited the company’s unit sales, amplified its market share and also helped hit the desired inventory levels.

However, American Eagle cut its EPS guidance for the fourth quarter to range between 33 cents and 35 cents, excluding potential impairment charges. The company had earlier guided to earn between 40 cents and 44 cents per share for the fourth quarter.

The current Zacks consensus earnings estimate for the fourth quarter is 43 cents per share.

American Eagle is expected to bring out its fourth quarter and full-year 2011 financial results on March 7, 2012.

American Eagle together with its subsidiaries engages in the design and marketing of casual clothing. 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 customers.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other teenage-focused retailers, such as Abercrombie & Fitch Co. (ANF - Analyst Report) and Gap Inc. (GPS - Analyst Report).

We currently have a short-term Zacks #2 Rank (Buy) and a long-term Outperform recommendation on the stock.

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