American Eagle Outfitters' Efficiency Focus Post-COO Departure: Analyst Raises Q2 EPS And Sales Estimates

Telsey Advisory Group analyst Dana Telsey reiterated a Market Perform rating on the shares of American Eagle Outfitters Inc AEO and raised the price target from $12 to $15.

AEO announced yesterday the planned departure of longtime Chief Operations Officer Michael Rempell.

Also, AEO now anticipates second-quarter revenue to be approximately flat Y/Y, better than the prior outlook (provided in late May) of down low-single digits.

The company also expects second-quarter operating income to come in better than the previous guidance range of $25 million - $35 million.

Following an impressive 23-year run at AEO, the analyst believes Michael Rempell's departure is more a function of his making a change for his personal life rather than indicating any internal strife or disruption at the company.

The analyst is encouraged by the better-than-expected second quarter results, particularly as other retailers have noted further deceleration in June.

The analyst added that the reaction to its early Fall products likely positions AEO well for the larger back-to-school season.

The analyst believes AEO will continue to focus on finding efficiencies and cost savings across the organization (the restructuring of the Quiet business in Q1) as discussed last quarter.

So, the analyst has raised the Q2 estimate, with sales expected to be flat Y/Y to $1.198 billion (up from down 2.1% Y/Y to $1.173 billion) and Q2 EPS of $0.14 (up from $0.11).

Price Action: AEO shares are trading higher by 2.93% at $15.30 on the last check Friday.