In it's The Outlook, Standard & Poor's says, "We believe American Eagle Outfitters (NYSE: AEO) is one of the most compelling investments in the youth apparel retailer space."
S&P continues, "We like the youth apparel retailer's merchandising and marketing strategies, and it leading brand positioning with the youth demographic." Here is the service's review.
"The American Eagle brand is considered among the 'coolest' brands, according to Teen Research Unlimited in spring 2007. We believe the company's focus on its core 15- to 25-year-old customer drives its success.
"Over the last three fiscal years, the company's EBIT (earnings before interest and taxes) margin expanded 1,190 basis points to 21% for fiscal 2007 (ended January). Same-store sales rose at annual double-digit rates during the same period.
"American Eagle Outfitters is one of the largest specialty retailers targeting the teen/young adult demographic, offering all-American casual apparel, accessories, and footwear.
"We are impressed with American Eagle's innovation and unique marketing targeted at 15- to 25-year-olds, a demographic whose rejection of traditional advertising has affected multiple consumer industries.
"For example, tapping into the appeal of MTV and reality TV to its online consumers, the company created It's A Mall World, a series of 12 five-minute episodes airing on MTV and ae.com beginning Aug. 1, just in time for back-to-school shopping.
"While the U.S. apparel market is considered mature, with demand mirroring population growth and somewhat related to fashion, the youth marketplace is generally considered attractive based on its spending clout, as their money is discretionary and the 'right' fashion accessory is a non-negotiable.
"To arrive at our 12-month target price, we applied the average price-to-earnings multiple for the company's peers in the youth apparel business of 15 to its estimated fiscal 2009 earnings per share of $2.25, and then added the $3 cash per share American Eagle currently has on its books.
"That gave us the target of $37. The shares recently traded at a 20%+ discount to peers based on fiscal 2008 and fiscal 2009 EPS estimates. We have a 5-STARS (strong buy) recommendation on the shares."
Each day, Steven Halpern's TheStockAdvisors.com features the latest investment ideas and market commentary from the financial newsletter community.
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Reader Comments (Page 1 of 1)
8-20-2007 @ 8:38AM
Mortimer said...
I used to like American Eagle until I found out they’re doing zilch to protect workers’ rights. AE claims it cares about workers — its own code of conduct requires contractors to respect the right of employees to form unions. Yet workers at the NLS warehouse - contracted to ship AE clothing in Canada - faced harassment and intimidation when they tried to improve conditions by forming a union with UNITE HERE, the union I work for. Since then, American Eagle hasn’t lifted a finger. Let’s boycott American Eagle until they enforce their code of conduct. Sign the boycott pledge at www.AmericanVulture.org.