American Eagle Outfitters (AEO) heads into the homestretch of the back-to-school shopping season with prospects of scoring high grades with shoppers.
The teen and young-adult clothing retailer cited a very good start to the back-to-school period on its Aug. 22 second-quarter conference call. And if analysts are on target, American Eagle should end up with a good report card for the entire season, which runs from late July to mid-September.
“Among the three major specialty retailers of preppy-style apparel — American Eagle, Aeropostale (ARO) and Abercrombie & Fitch (ANF) — American Eagle looks outstanding for back-to-school in terms of merchandise content and positioning, including its value proposition and marketing,” said B. Riley & Co. analyst Jeff Van Sinderen. My sense is that among these three, American Eagle will have the most improved margins for back-to-school this year.”
On the comeback trail with a new CEO, American Eagle Outfitters is growing earnings once again. View Enlarged Image
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Continued Momentum
After a good start to the back-to-school season, American Eagle should see continued momentum through August and September, adds Brian Sozzi, chief equities analyst at NBG Productions.
“I wouldn’t be surprised if third-quarter sales and earnings came in stronger than expected because they’re taking so much market share from their key competitors,” he said.
The upbeat prospects come at a time when American Eagle’s business is sizzling with two straight quarters of double-digit earnings growth.
In the most recent second quarter, earnings surged 62% to 21 cents a share. That excluded charges from the sale of its 77kids business and other one-time items. Sales grew 11% to $740 million, ahead of views. Same-store sales, including its online division, rose 9%, vs. a 1% gain last year.
American Eagle has come back impressively after tough going on and off the past few years. Earnings slipped 16% in 2011. Now, thanks to the efforts of Chief Executive Robert Hanson, who took the helm Jan. 30, American Eagle is on the comeback trail.
Hanson came to the company from Levi Strauss, where he was global president of the Levi’s Brand. He replaced Jim O’Donnell, who retired.
Hanson has done a good job getting American Eagle back on track through changes in areas such as more frequent flows of fresh fashion merchandise into the stores and leaner inventory for better margins, says Van Sinderen.
On the merchandising front, Hanson has emphasized American Eagle’s core areas of strength — such as denim for back-to-school — through sharper product content, better visual merchandising and better marketing positioning of the value proposition, Van Sinderen says.