Based in Pittsburgh, PA, American Eagle Outfitters (AEO) is a specialty retailer of casual apparel, accessories and footwear. Their target consumers are 15–25 years old men and women. They currently operate under the AE Brand, Aerie by American Eagle and an online retailing channel – AEO Direct.
The company operates more than 1,000 stores in the US, Canada, Mexico, China, Hong Kong and the UK. Some of their merchandise is also available at international stores operated by licensees in 22 countries. Additionally, they ship to 81 countries through their e-commerce operations.
Solid Quarterly Results and Strong Guidance
American Eagle (AEO - Analyst Report) reported robust earnings for their fourth quarter. Earnings of $0.42 per share were up 17% from the same quarter last year and were slightly ahead of the Zacks Consensus Estimate of $0.41 per share. Revenues were up about 3% but were weaker than expected. Comparable-store sales improved 4% versus flat comps in the same quarter last year, despite warmer weather.
The management provided upbeat guidance for the current quarter. They expect earnings in the range of $0.17–$0.19 per share compared with the street consensus of $0.15 per share.
Rising Estimates
Analysts have been raising their estimates for the company after robust results and better-than-expected guidance. Zacks Consensus Estimates for the current and next year are now $1.23 per share and $1.34 per share, up from $1.15 and $1.25, before the results.
The company has an excellent track record of beating estimates, with only two misses in the last twenty quarters.
Returning Cash to Shareholders
Earlier this month, the company announced a quarterly cash dividend of $0.125 per share, marking the company’s 47th consecutive quarterly dividend. They also announced an additional 25 million shares for repurchase through January 30, 2021.
In 2015, the company returned about $324 million to shareholders via dividends and repurchases.
The Bottom Line
Despite savings from low gas prices, consumers have been reluctant to spend. Further, consumers’ rising preference for online shopping is creating headwinds for mall retailers. Rapidly changing trends in teen fashion and rising competition from lower cost teen fashion chains isn’t helping teen retailers either.
Despite these challenges, American Eagle has been able to deliver solid performance by improving merchandise and operational performance, and controlling inventory levels. They have also been successful in adapting to the rapidly changing tastes of their fickle teen clients.
In addition to a Zacks Rank #1 (Strong Buy), the stock has scored top “A” score both for Value and Growth Styles and “B” for Momentum, giving it the top VGM score of “A”. It is currently trading at a reasonable valuation of 13.47X forward earnings. Zacks Industry Rank of 87 out of 265 (top 33%) makes this stock further attractive.
Comments
Log in or sign up to join the conversation.