American Eagle Missed Earnings Outweighed by Guidance

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American Eagle Outfitters Inc. (NYSE: AEO) reported its fiscal third-quarter financial results before the markets opened on Wednesday. The company posted $0.37 in earnings per share (EPS) and $960.4 million in revenue, compared with consensus estimates from Thomson Reuters that called for $0.38 in EPS on revenue of $960.81 million. In the same period of last year, the retailer said it had EPS of $0.41 and $940.61 million in revenue.

During the quarter, consolidated comparable sales were up 3%, following a 2% increase last year.

Gross margin took a step back this quarter to 39.0%, compared to 40.2% last year. The reduction in margin rate was due to higher promotions and increased shipping costs associated with a strong digital business.

In terms of the outlook for the fiscal fourth quarter, the company expects to see EPS in the range of $0.42 to $0.44. Consensus estimates call for $0.39 in EPS and $1.15 billion in revenue for the quarter.

On the books, the company ended the quarter with total cash of $258 million, down from $292 million last year. Over the past year, American Eagle returned $88 million in share buybacks and $89 million in dividends and invested $189 million in capital expenditures, resulting in a lower cash balance.

CEO Jay Schottenstein commented:

The third quarter produced record sales, sequential margin improvement and marked eleven straight quarters of comp sales growth. Digital sales continued to grow at a rapid pace, while we also saw store sales strengthen. These results validate our investments in product leadership, innovation, quality and brand equity. I’m very pleased to see strong momentum continue into the fourth quarter, positioning us well for the next few critical weeks of the holiday season.

Shares of American Eagle were last seen up 1% at $16.26, with a consensus analyst price target of $14.06 and a 52-week range of $10.23 to $18.49.