Sector Snap: Teen retailers mixed on holiday sales

Teen retailers mixed as holiday sales disappointing at American Eagle, Aeropostale

Associated Press

NEW YORK (AP) -- Shares of teen retailers were mixed on Thursday as Aeropostale and American Eagle Outfitters reported disappointing holiday sales while Urban Outfitters results shined.

Sales from November through December can make up 40 percent of a retailer's revenue for the year, making it the most crucial period on the calendar.

Earlier in the day Aeropostale Inc. announced that its sales for the nine-week period ended Dec. 29 fell 6 percent to $645 million. Revenue at stores open at least a year, including online results, dropped 8 percent. Excluding online sales, that revenue declined 9 percent.

This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.

The chain also slashed its fourth-quarter earnings forecast.

Jefferies' Randal Konik said in a client note that Aeropostale's 8 percent decline in revenue at stores open at least a year was well below hi estimate for a 1 percent drop.

But the analyst said that he would buy Aeropostale on the weakness in the stock due to its "extremely attractive balance sheet."

Konik maintained a "Buy" rating but trimmed his price target to $18 from $21.

Aeropostale's stock dropped 56 cents, or 4.2 percent, to $12.81 in afternoon trading. The shares have traded in a 52-week range of $11.76 to $23.05.

At American Eagle Outfitters Inc., quarter-to-date revenue at stores open at least a year climbed 4 percent, including its online results. Stripping out the online performance, the figure was up only 1 percent. The quarter-to-date period, which is through Jan. 8, includes the holiday period.

This is slower growth than a year ago, when the metric climbed 13 percent with online revenue or 12 percent without.

Adrienne Tennant of Janney Capital Markets said that while the performance was in line with American Eagle's expectations, Wall Street was likely looking for modest upside.

The analyst remains optimistic on the chain, saying that its new spring product assortment has shown some promise in the after-Christmas selling season.

Tennant reaffirmed a "Buy" rating and trimmed American Eagle's price target to $25 from $26.

The retailer's shares declined 97 cents, or 4.7 percent, to $19.66. The stock has traded between $12.86 and $23.94 over the last year.

One bright spot was Urban Outfitters, which reported that its revenue for the November through December period climbed 15 percent to $666 million. Comparable retail segment sales, which includes direct-to-consumer, increased 9 percent.

Konik said he was impressed with the company's performance, which included strong results from its Urban Outfitters, Free People and Anthropologie brands. While he expects the retailer to continue to improve going forward, he believes that the good news is already priced into the stock, which has rallied 52 percent in the past 6 months.

Konik maintained a "Hold" rating and $35 price target.

Shares of Urban Outfitters Inc. climbed $1.66, or 4.1 percent, to $42.41. Earlier in the session the stock hit a fresh 52-week high of $43.27.

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