Why American Eagle Is Wednesday's Big Earnings Loser

Chris Lange

When American Eagle Outfitters Inc. (NYSE: AEO) reported its most recent quarterly results before the markets opened on Wednesday, the company said that it had $0.34 in earnings per share (EPS) and $965 million in revenue. That compares with consensus estimates of $0.31 in EPS and $938.23 million in revenue for the fiscal second quarter, as well as the $0.19 per share and $844.56 million posted in the same period of last year.

During the most recent quarter, consolidated comparable sales increased 9%, compared to a 2% increase last year. By brand, American Eagle’s comparable sales increased 7% and Aerie’s comparable sales increased 27%, compared to flat and 26% comparable sales last year, respectively.

Although the results for this quarter were solid, investors seemed to look past this to the third-quarter guidance, which disappointed.

Looking ahead to the fiscal third quarter, the company expects to see EPS in the range of $0.45 to $0.47. Consensus estimates call for $0.49 in EPS and $987.98 million in revenue for the quarter.

Jay Schottenstein, AEO’s CEO, commented:

The second quarter results exceeded our expectations, delivering record sales and 79% growth in adjusted earnings. This marked our 14th consecutive quarter of comparable sales growth, with the American Eagle and Aerie brands posting positive results across both stores and e-commerce. Driven by exceptional product, teamwork and execution, it’s gratifying to see strength throughout our business, as we capitalize on the broad appeal of our brands and leading merchandise assortments.

Shares of American Eagle were last seen down about 11% at $24.15, with a consensus analyst price target of $25.40 and a 52-week range of $11.94 to $29.88.