UPDATE 3-American Eagle posts profit, shares up on Nov data

Tue Nov 24, 2009 12:36pm EST

* Q3 EPS ex-tax benefit 21 cents, in line with Street view

* November sales so far not as weak as analysts expected

* Shares up 4.8 pct (Adds CEO, analysts' comments, byline, updates stock action)

By Ben Klayman

CHICAGO, Nov 24 (Reuters) - American Eagle Outfitters Inc (AEO.N) posted a third-quarter profit in line with analysts' expectations, and its shares jumped 4.8 percent as November sales so far were not as bad as feared.

The teen clothing retailer said on Tuesday that same-store sales through the first three weeks of November fell 5 percent, matching October's performance. Tim Ghriskey, chief investment officer with Solaris Asset Management, said analysts were expecting a decline of 6 percent or more.

"The whispers out there were for things to be worse and it ends up not being bad," added Ghriskey, whose firm has owned the stock in the past. "Not the prettiest quarter, but not a terrible quarter like some of the Street feared."

Sales at American Eagle have been pressured as consumers cut back on trips to the mall and sought bargains offered by rivals like Aeropostale Inc (ARO.N) and Forever 21.

Before Tuesday, American Eagle shares had slid almost 27 percent since reaching a 52-week high of $19.86 on Oct. 19. They were up 69 cents at $15.23 in early Tuesday afternoon trading on the New York Stock Exchange.

Jefferies & Co analyst Randal Konik said in a research note that industry sales had started off slowly in November, so American Eagle's performance was encouraging. The company said it will provide a forecast for the fourth quarter, including the key holiday season, next week.

Konik, who reiterated his "buy" rating, also said the company's more than $700 million in cash puts it in a strong position among retailers.

EYES RECOVERY IN 2010

American Eagle CEO Jim O'Donnell said consumers remain focused on value, but the company has seen improvement in its sales trends compared with the first half of the year.

"American Eagle Outfitters continued to gain ground in the third quarter despite a very cautious consumer," he told analysts on a conference call. "We are poised to continue our momentum towards a recovery in 2010."

O'Donnell said the key will be December and whether demand is balanced throughout the month or comes in a rush near the Christmas holiday, but American Eagle was planning for either outcome.

Third-quarter net income rose to $59.2 million, or 28 cents a share, compared with $42.6 million, or 21 cents a share, a year earlier. Excluding a tax benefit, earnings were 21 cents a share, matching what analysts polled by Thomson Reuters I/B/E/S had expected.

Sales slipped 1 percent to $748.96 million, but were essentially in line with the $748.32 million analysts had expected.

The company, whose brands include aerie, 77Kids and Martin & Osa, has relied on a host of promotions to spur shopping at its main chain of American Eagle stores, such as buy one sweater or hoodie and get one half off.

American Eagle was hurt in the year-ago quarter by too much inventory and product missteps, and discounted heavily to clear through merchandise that pressured margins. Ghriskey said the discounting was not as heavy in the third quarter.

The company also said it expects capital expenditures this year to finish in the range of $120 million to $130 million, about half of last year's level. (Additional reporting by Alexandria Sage, editing by Gerald E. McCormick, Dave Zimmerman; Editing by Tim Dobbyn) ((benjamin.klayman@thomsonreuters.com; +1 312 408 8787; Reuters Messaging: ben.klayman.reuters.com@reuters.net))

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.