American Eagle Outfitters Inc.’s (AEO) comparable-store sales for January plummeted 6.0% against a 10.0% increase in the year-earlier period. Total sales for the four weeks ended January 29, 2011, dropped 9% to $145 million from $160 million for the four weeks ended January 30, 2010.
Comparable-store sales for the fourth quarter of fiscal 2010 dropped 7.0% versus a 5.0% increase in the same period last year. Total sales for the period came in at $916 million, which represents a decrease of 4.0% from $956 million a year ago.
For fiscal 2010, comparable store sales nudged down 1.0% versus a wider decline of 4.0% in the prior year. Total sales for the year increased a marginal 1.0% to $2.97 billion from $2.94 billion in fiscal 2010.
American Eagle pointed out that effective inventory management and cost containment efforts are helping in alleviating the pressure on earnings. The company expects fourth quarter earnings from continuing operations to be at the high end of the company’s guidance range of 41 cents to 43 cents a share. The Zacks Consensus Estimate of 42 cents is in consonance with the range guided.
We remain impressed with the company’s continued momentum 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 #4 Rank, which translates into a short-term ‘Sell’ recommendation. Our long-term recommendation on the stock remains ‘Neutral’
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