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Can Digital Sales Aid American Eagle's (AEO) Q2 Earnings?

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American Eagle Outfitters, Inc. (AEO - Free Report) is slated to release second-quarter fiscal 2020 results on Aug 9. The apparel and shoe retailer’s loss of 84 cents per share in the last reported quarter was substantially wider than the Zacks Consensus Estimate. Further, it lagged the consensus estimate by 56.3%, on average, in the trailing four quarters.

The Zacks Consensus Estimate for the second quarter is currently pegged at a loss of 14 cents, whereas it reported earnings of 39 cents in the year-ago period. The consensus mark for loss has widened in the past 30 days. Further, the consensus mark for revenues stands at $833.7 million, indicating a decline of 19.9% from the year-ago period’s reported figure.

Key Factors to Note

American Eagle has been benefiting from strong digital demand as the ongoing pandemic has forced in-store shoppers to shift to online shopping. Consequently, management has been banking on digital acceleration in the current scenario. In doing so, it ramped up e-commerce promotions and offered major discounts to increase customer engagement and boost sales. Also, the company tied up with social media influencers to attract more customers online. These efforts are likely to have aided its top line in the fiscal second quarter.

Additionally, the company has been benefiting from sales contributions from reopened stores, improved inventory and cost-reduction efforts. Notably, its reopened stores as of June were achieving nearly 95% of the last year’s sales productivity. Even though stores have been reopening gradually, the company expects the robust digital sales momentum to continue in the fiscal second quarter. Gains from the reopened stores and digital acceleration are expected to get reflected in the company’s results for the to-be-reported quarter.

American Eagle Outfitters, Inc. Price and EPS Surprise

 

American Eagle Outfitters, Inc. Price and EPS Surprise

American Eagle Outfitters, Inc. price-eps-surprise | American Eagle Outfitters, Inc. Quote

Further, inventory clearance positions the Aerie and AE brands for new back-to-school collections in late July, followed by the fall season in late September. The company expects current inventory-optimization initiatives to streamline assortments, provide greater alignment of inventory to sales plans and better utilize supply-chain strengths to chase product demand. This should result in strong inventory position at the end of the fiscal second quarter.

However, the company is likely to have witnessed margin pressures in the fiscal second quarter, owing to increased costs as well as higher markdowns and promotions to clear inventory.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for American Eagle this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But this is not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

American Eagle has a Zacks Rank #4 (Sell) and an Earnings ESP of +44.66%.

Stocks With Favorable Combinations


Here are some companies you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat.

Caseys General Stores, Inc. (CASY - Free Report) currently has an Earnings ESP of +4.79% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

RH (RH - Free Report) presently has an Earnings ESP of +13.47% and a Zacks Rank #2.

NIKE, Inc. (NKE - Free Report) currently has an Earnings ESP of +6.24% and a Zacks Rank #3.

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