American Eagle Outfitters Earnings: Value or Value Trap? (AEO)

Douglas A. McIntyre

American Eagle Outfitters Inc. (NYSE: AEO) has been one of those great success stories for teens and twenty-somethings.  Until last year and this year.

For April, its same-store sales came in at +2%.  This was better than expectations of 0.6% from First Call, although these stores compared to month by month same store sales targets can fluctuate wildly.  Its total sales including new stores was a gain of about 15% to $197.7 million. 

We also already have its quarterly number of “clothing revenues” as being up 5% total (down 6% on same store sales basis), with total store revenues at $640.3 million.  The company also reaffirmed its $0.18 to $0.20 EPS guidance.  Unfortunately, that number compares to $0.35 EPS in the same quarter last year.

First Call has estimates still pegged at $0.19 EPS on $637.16 million in revenues.  Next quarter estimates are $0.29 EPS on $741.4 million and fiscal January 2009 estimates are $1.58 EPS on $3.26 Billion in revenues.

With shares down less than 1% today, the current implied fiscal year expectations give it a forward P/E ratio of 10.8 for the current forward year and a multiple of about 1.1-times revenues.

From 2004 to 2007, this one of the greatest retail growth stock stories out there.  But the last 18-months haven’t yielded anything more than a downward channel for the stock that hasn’t been reversed yet.  That first attempt of a reversal at the start of 2008 failed and its stock is only about 10% off of its 52-week lows.

The 52-week trading range is $15.58 to $28.28.  This is either becoming one of the best value stocks out there…. or another value trap.  We’ll find out Wednesday morning.

Jon C. Ogg
May 27, 2008