American Eagle's Flat Comparables - Analyst Blog

American Eagle Outfitters Inc.'s (AEO) comparable-store sales for November came in flat against a 2.0% decrease in the year-earlier period. Total sales for the four weeks ended November 27, 2010, upped 2% to $272 million from $266 million for the four weeks ended November 28, 2009.

The Thanksgiving weekend boosted sales in the reported month thereby compensating for the softness observed during the rest of the month. Additionally, American Eagle pointed out that inventory management initiatives are working well and customers are reacting positively to the merchandise offering.

American Eagle expects its fourth quarter earnings from continuing operations to be between 43 cents and 46 cents per share. This is comparable with the Zacks Consensus Estimate of 45 cents, which lies on the higher end of the guided range.

The company, in an endeavor to augment shareholder value and inspire confidence in the company's value and prospects, announced a special dividend of 50 cents a share in addition to the regular quarterly dividend of 11 cents a share. This plan is intended to be financed by existing cash.

American Eagle has also extended its share repurchase authorization of 16 million shares  through February 2, 2013. The company's continuous effort to increase shareholder wealth, through share repurchases and dividend announcements, reflects its ability to generate strong cash flows.

We remain impressed with the company's continued performance in denim along with improved merchandise assortments in the women's business segment, which will likely lead to a turnaround in top-line momentum as well as a rebound in gross margin.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other teenage-focused retailers, such as Abercrombie & Fitch Co. (ANF) and Gap Inc. (GPS).

American Eagle's shares maintain a Zacks #3 Rank, which translates into a short-term ‘Hold' recommendation. Our long-term recommendation on the stock remains ‘Neutral'.

 
AMER EAGLE OUTF (AEO): Free Stock Analysis Report
 
ABERCROMBIE (ANF): Free Stock Analysis Report
 
GAP INC (GPS): Free Stock Analysis Report
 
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