Why Has American Eagle’s Stock Price Fallen Despite Meeting Consensus Estimates?

American Eagle Outfitters (NYSE:AEO) posted its third quarter earnings, for the period ending October 31, 2016, on November 30th. The company was able to meet the consensus estimates for both sales and earnings per share.

See our complete analysis for American Eagle Outfitters

Amid a tough retail environment, American Eagle delivered a strong quarter, with total revenue rising 2% and consolidated comparable sales also increasing 2%. While these may seem like modest figures, considering it was on the back of a positive 9% comp last year, it is impressive. The sales growth was driven by strength in the digital business, fueled by rapid growth in the mobile channel. On a consolidated basis, while the transactions were down, the average transaction size increased, as a result of a higher average unit retail price, and higher units per transaction. The company also managed to keep the promotional activity controlled; however, it was up marginally as compared to the prior year’s quarter.

The company’s Aerie brand, its lingerie and activewear segment, was again the standout performer, posting a sixth consecutive quarter with comps over 20%. The comps of 21% followed a 21% growth in the third quarter of last year. The brand’s innovation around the bralettes continued to see great momentum. Additionally, a new yoga-inspired line – Chill. Play. Move. – was also launched to an incredible response. The newly designed stores are also generating productivity at 50% above the older formats. The company is on track with its expansion plans, and will end the year with 10 to 15 such stores, and another 25 by the end of next year.

However, a weak holiday guidance provided by the company pulled down its stock price. AEO is anticipating an earnings per share of $0.37 to $0.39 for the fourth quarter, against consensus estimates of $0.45. The company stated this guidance includes potential impairment and restructuring charges. The EPS of $0.42 in the corresponding quarter of last year included $0.07 of non-recurring items, including a gain on the sale of a distribution center of $9.4 million, and a lower tax rate of 27.9%, against an anticipated rate of 35% in the quarter this year. The company also estimates the comparable sales to be in the range of a flat to a low-single-digit increase.

Have more questions about American Eagle Outfitters? See the links below:

• Growth Momentum To Continue For American Eagle In The Third Quarter
• What Is American Eagle Doing To Bolster Its Direct Business?
• How Is American Eagle Expected To Perform In 2016?
• How Has the Digital Age Affected Apparel Retailers?
• How Did American Eagle Manage To Improve Its Gross Margins In The Second Quarter?
• Growth In Aerie Helps American Eagle Beat Estimates
• How Will American Eagle Perform In The Second Quarter Of Its FY 2016?
• How Has The Merchandise Mix Of American Eagle Changed Over The Last Three Years?
• Why Will American Eagle’s Aerie Brand Be A Key Growth Driver In The Future?
• Why Are We Bullish On American Eagle?
• What Can Move American Eagle’s Stock Down In The Next Couple Of Years?
• What Is American Eagle Outfitters’ Revenue & Net Income Breakdown In Terms Of Different Operating Segments?
• How Has American Eagle Outfitters’ Revenue Composition Changed In The Last Five Years?
• What’s American Eagle Outfitters’ Fundamental Value Based On Expected 2016 Results?
• Where Will American Eagle Outfitters’ Revenues Come From In The Next Five Years?

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