On Tuesday, November 24, American Eagle Outfitters (AEO) stepped into the earnings spotlight, reporting that third-quarter earnings came in at 28 cents per share. Taking a tax benefit out of the equation, AEO would have earned 21 cents per share, falling a penny shy of the consensus estimate.
Quarterly sales dropped to $749 million from $754 million, with same-store sales falling off 4%. AEO did not provide a fourth-quarter forecast, which it will do when it reports November sales on December 3; this will allow the company to account for the sales from the Thanksgiving weekend.
According to the company's transcript, sales of women's denim and graphic T-shirts were strong. Moreover, sales of women's graphic T-shirts turned positive for the first time in "several quarters." The company also believes that its planned promotional strategy in this category is "both compelling to consumers as well as delivering strong market performance." Can these departments continue to pull their weight and the weight of the rest of the retailer's products?
Putting the sales results off until Thanksgiving sales can be considered a good move, as Black Friday sales could prove a boon to the report. Of course, the opposite could always be true.
Technically, AEO was performing well until it met with resistance in the $19 region roughly six weeks ago. Once that happened, the teen retailer's stock pulled back to test the support of its 10- and 20-week moving averages, which both failed. Fortunately for AEO, its 10-month moving average has stepped up to the plate and is acting as support. We will see if this long-term measure of support can hold throughout the holiday shopping season.
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