Teen apparel retailer American Eagle Outfitters (NYSE:AEO) continues its strong run post solid Q4 results, with the stock touching a 52-week high Monday. Apart from a strong line-up for the spring quarter and good acceptance in key categories including denim, wovens, tees and shorts, American Eagle’s newly appointed CEO, Robert Hanson, is finding a liking among investors.
Considering American Eagle’s better inventory management, lower markdowns and strong sales in this quarter, we believe 2012 can be a turnaround year for the company. American Eagle competes with other teen specialty retailers such as Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO) and Gap Inc. (NYSE:GPS).
2012 – a potential turnaround year for American Eagle Outfitters
This year has started on a positive note for American Eagle Outfitters. While a 35% reduction in inventories was the primary catalyst behind the growth after Q4 FY11 earnings, solid sales in February and good traction in key apparel categories have carried forward this positive momentum.
Additionally, the appointment of new CEO Robert Hanson is also boding well with the market expectations. Hanson has been instrumental in American Eagle’s successful spring endeavors, and the market expects this trend to continue.
We also expect the company to start benefiting from declining cotton prices starting this quarter, which should improve American Eagle’s margins, going ahead.