(Reuters) - Teen clothing retailer American Eagle Outfitters Inc (AEO.N) said it got off to a strong start for the holiday selling season and raised its earnings forecast for the year, while Aeropostale Inc’s ARO.N forecast showed it expects a tougher season than its rival.
Aeropostale, which has been losing out to its rivals as it sees inconsistent demand from its young clients, said the environment in the teen apparel space is still heavily promotional. Analysts have said, however, that on basic items like sweaters and T-shirts, Aeropostale was cutting prices more than the competition.
“While our performance over the Black Friday weekend was encouraging, the environment during the first few weeks of November was challenging,” Aeropostale’s Chief Executive Thomas Johnson said in a statement.
The Black Friday weekend, which typically starts the day after Thanksgiving, prompted high levels of competition among all teen retailers, as they tried to get more shoppers into their stores. American Eagle and Abercrombie & Fitch (ANF.N) were running discounts of 40 percent.
But Aeropostale had discounts of 50 percent to 70 percent.
American Eagle, meanwhile, said its margins rose because of fewer promotions compared with the last year.
“Our holiday season and fourth quarter have started off strongly and consistent with our expectations,” said American Eagle Chief Executive Officer Robert Hanson.
“Against strong double-digit sales gains last year, we drove positive comparable sales and record sales volumes on Black Friday and over the Wednesday-through-Sunday period,” Hanson said on a conference call with analysts.
American Eagle, which prices its clothes in between peers Abercrombie & Fitch Co (ANF.N) and Aeropostale Inc ARO.N, earned $78.6 million, or 39 cents per share, in the third quarter ended October 27, up from $52.4 million, or 27 cents per share, a year ago. Sales rose 11 percent to $910 million, the company said in results released on Wednesday before the start of the U.S. stock market’s regular trading session.
After the closing bell on Wednesday, Aeropostale posted a slightly bigger quarterly profit - $24.9 million, or 31 cents a share, compared with $24.1 million, or 30 cents a share, in the year-ago period - but its forecast for the quarter fell short of estimates. For the fourth quarter, it expects to earn between 36 cents and 41 cents a share on an adjusted basis. Analysts, on average, were expecting the company to earn 54 cents a share, as per Thomson Reuters I/B/ES.
Aeropostale’s stock fell 6.5 percent in after-hours trading from its New York Stock Exchange close at $14.12.
“American Eagle is ... essentially driving its business by chasing products into where the demand exists,” said Brian Sozzi, chief equities analyst of NBG Productions.
“To us, this shows the American Eagle buying teams are on the pulse of teen fashion preferences; to generate more than 10 percent comparable sales on this type of lean inventory is impressive,” he wrote in a note.
American Eagle now expects full-year earnings of between $1.38 and $1.40 per share from continuing operations, up from its previous forecast of $1.33 to $1.36.
Analysts, on average, were expecting earnings of $1.37 per share for the year, according to Thomson Reuters I/B/E/S.
The company’s initiatives to keep its fashion fresh resonated with its teen clientele, leading to a 10 percent jump in same-store sales in the quarter ended October 27.
American Eagle shares jumped 7.1 percent on Wednesday to close at $20.77 on the News York Stock Exchange - up $1.38 from their close on Tuesday at $19.39.
Reporting by Nivedita Bhattacharjee in Chicago and Siddharth Cavale in Bangalore; Editing by Akshay Lodaya, Maju Samuel, Gunna Dickson and Jan Paschal