American Eagle Outfitters Inc. (AEO) reported a growth of 5.0% in comparable store sales for the four weeks ended October 29, 2011. The company registered a growth of 7.0% in comparable store sales, including AEO direct.
For the month under review, sales increased 11.0% to $832.0 million from $752.0 million in the year-ago period.
Comparable store sales for third-quarter ended October 29, 2011, grew 5.0% from the prior-year quarter.
Comparable store sales for the year-to-date period ended October 29, 2011, inched down 1.0% compared with an increase of 1.0% in the prior-year period. However, including AEO direct, comparable store sales inched up 1.0% during the period. Total sales for the period rose 3.0% to $2.12 billion from $2.05 million a year ago.
Execution during the month and the nine-month period was driven by the company's strong merchandise assortment and improved inventory management.
Guidance
Driven by strong sales in October 2011, the company now expects earnings per share to be in the range of 26 to 27 cents for the third quarter ending October 29, 2011, an upside from the previous earnings per share guidance of 22 to 27 cents.
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 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 asGap Inc.(GPS). Recently, Gap reported a decline of 6.0% in comparable store sales for October, 2011.
The stock currently retains a short-term Zacks #2 Rank ('Buy') that corresponds with our long-term ‘Neutral’ recommendation on the company.
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