Categories Earnings, Retail

Here’s what investors need to know ahead of American Eagle’s Q2 earnings report

With several factors working in its favor, American Eagle Outfitters (NYSE: AEO) witnessed steady sales growth in the recent quarters, which mostly translated into stronger-than-expected earnings. Once again, expectations are high when the apparel retailer gets ready to unveil its second-quarter numbers. The results will be published on September 4 at 8:00 am ET.

American Eagle Outfitters (AEO) Q1 profit rose 2%

The ongoing market share expansion, supported by the management’s aggressive growth initiatives and improved merchandise assortment, continues to boost comparable-store sales. The company has been successful in maintaining stable store traffic, while also attracting customers to its digital platform. The positive factors, combined with an impressive history of returning capital to shareholders, makes the stock attractive to investors.

Estimates

The consensus estimate for second-quarter profit is $0.32 per share, which is down from last year’s $0.34 per share and comes at the higher end of the management’s outlook range. Revenues are expected to drop 4.20% annually to about $1 billion. Like in the past, the top-line growth will be driven by the American Eagle and Aerie brands. Earlier, the company had predicted positive comparable store sales growth, but in a low-single-digit.

Strain on Margin

The modest outlook reflects potential disruptions caused by the store remodeling activities. Though the online sales trend is encouraging, higher expenses related to logistics and store reorganization might restrict margin growth in the to-be-reported quarter.

Also read: Five Below Q2 earnings beat Street view

It is expected that higher selling, general and administrative expenses, mainly reflecting costs associated with promotional activities and investments, will impact profitability during the remainder of the year.

In the first quarter, adjusted earnings moved up 4% annually to $0.24 per share, aided by an 8% growth in revenues to $886.29 million. There was a 6% growth in comparable-store sales.  The results also exceeded the market’s forecast.

Competitors

Abercrombie & Fitch (ANF) this week reported a net loss for the second quarter, when sales declined modestly. The unimpressive performance and concerns about the trade-related uncertainties prompted the management to lower its full-year guidance. Earlier, Guess? (GES) published stronger-than-expected earnings and revenues for its most recent quarter, triggering a stock rally. The company also issued positive guidance for the third quarter and full fiscal year.

Related: American Eagle Outfitters Q1 2019 Earnings Call Transcript

Shares of American Eagle Outfitters dropped to a two-year low in Mid-August after losing momentum consistently in recent months. Since the beginning of 2019, the stock lost about 13%.

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