Aeropostale & American Eagle Land on the Retail Throne

Management at American Eagle Outfitters AEO must be thrilled this morning, as a blowout first quarter has far surpassed analyst predictions and impressed beyond all previous expectations. As the company soars into acclaimed retail territory, others such as Aeropostale ARO have begun to take flight. Much of AEO's recent success is being attributed to new Chief Executive Officer, Robert Hanson. His plan to purchase fewer inventories and instill a returns-driven strategy has been put in motion, and the results have been astronomical. According to Brean Murray Carret & Co., American Eagle announced highly impressive first quarter bottom-line results. It was even said that the +17% 1QFY12 comps are likely to be the highest in the retailing segment. Analysts at the research firm are kicking themselves today, as the turn for AEO was missed. "We are reiterating our Hold rating but raising our FY12 EPS to $1.10 (from $0.95) and FY13 EPS to $1.29 (from $1.01) after American Eagle announced highly impressive 1Q comps and material EPS upside. We are disappointed that we have missed the turn in the name; at current levels, we believe the valuation more than reflects optimism that current momentum will continue unabated. We will remain muttering on the sidelines," Brean Murray Carret & Co. said in a recent research report. Guidance for the retailer was not too shabby either. Citi said that management's full year guidance of $1.06 to $1.12 assumes a +LSD to +MSD comp. In terms of the immediate future, AEO expects Q2 to slightly beat last year, with momentum continuing to build. Aeropostale is another brand that has recently reported numbers striking enough for analysts and the retail industry to take notice. The company's preannouncement of better-than-expected 1Q comps has already prompted a PT and estimate change from Brean Murray Carret & Co. The research firm bumped its target price up from $22 to $25 as ARO's turnaround has been foreshadowed by the retailers upside. It looks as though the firm is not going to allow another improvement story to slip through its fingers, as it noted that ARO did well to reduce its overall promotional pricing while producing styles that have customers jazzed for the coming season. Summer is sure to bring teens racing into the mall, with inspired styles consistently slinking off the hangers and onto the bodies of stylish shoppers. Terrific earnings have signified a turnaround story for both AEO and ARO, with increased confidence this morning that both are sure to succeed. AEO is currently trading at $20.26, up +32.5% YTD, while ARO is currently trading at $22.48, up +47.74% YTD.