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American Eagle Posts Solid Comps on Successful Holiday Feat

Zacks Equity Research

American Eagle Outfitters, Inc. AEO was among those retailers that emerged strong this holiday season. Notably, the holiday season this year marked the highest seasonal sales in six years. The company posted comparable store sales (comps) growth of 6% for fourth-quarter fiscal 2018 to date. However, it recorded comps increase of 8% in the year-ago period.

Nevertheless, management reiterated the earnings per share guidance of 40-42 cents for the fourth quarter, which is slated to release on Mar 6.  In the prior-year quarter, the company posted adjusted earnings of 44 cents. The guidance includes impacts related to the additional 53rd week in fiscal 2017. This should result in revenue decline of about $60 million and reduce earnings by 7 cents per share from the prior-year number.

Notably, the company’s success this holiday season was driven by its robust merchandising offerings and solid momentum at its AE and Aerie brands. In fact, it witnessed impressive performance across brands and channels, reflecting strong momentum in its overall business. Furthermore, American Eagle bought back an additional 4 million shares in December 2018. With this, it repurchased 7.3 million shares worth $144 million on a year-to-date basis.

Apart from American Eagle, retailers like Target Corporation TGT, Ollie's Bargain Outlet Holdings, Inc. OLLI and Urban Outfitters, Inc. URBN witnessed robust holiday season. These companies reported comps growth of 5.7%, 7.1% and 5%, respectively.

Coming back to American Eagle, it boasts an impressive comps trend, delivering 15th straight quarter of positive comps in third-quarter fiscal 2018. Solid gains from strategic initiatives and ability to boost market share through strong brands and compelling merchandise have been fueling comps. Both digital and in-store businesses are also contributing to comps growth.

Meanwhile, the AE brand is gaining from its leadership position in bottoms, with jeans business recording 21st consecutive quarter of comps growth. Also, the quarter marked Aerie brand’s 16th straight quarter of double-digit sales growth, reflecting a significant momentum in all areas of the business.

Additionally, the company has been striving to develop its omni-channel platform by enhancing the digital portals besides investing in store fleet. Continued strength in the Aerie business helped American Eagle gain a strong footing in the retail space. The Aerie brand has evolved into a lifestyle brand, and remains focused on expanding market share and rapidly growing customer base. Management expects to continue with the sturdy momentum and brand strength, and remains focused on maximizing shareholders’ value.


 

A glimpse of American Eagle’s price performance shows that the stock has outperformed the industry in a month’s time. Shares of this Zacks Rank #3 (Hold) company have gained 11.4% compared with the industry’s 0.8% upside. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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