American Eagle: Stock is Hurting but e-Commerce Growth Lifts Outlook

-31.96%
Downside
25.14
Market
17.11
Trefis
AEO: American Eagle Outfitters logo
AEO
American Eagle Outfitters

American Eagle Outfitters (NYSE:AEO), the popular apparel store that specializes in teen and young adult clothing and accessories has certainly seen better days with the current market price sitting at $11.17. Although the apparel industry is certainly competitive, the depressed stock price isn’t any indication that American Eagle is under performing competitors like Abercrombie & Fitch (NYSE:ANF), Aeropostale (NYSE:ARO) and others. Instead, the decrease is undoubtedly due to the soaring cotton prices that have inflicted the apparel industry with poor margins since March 2011.

We’ve seen American Eagle slide from $14.64 on March 1st to dip below 10.50 – a crippling drop of nearly 25%. It has since recovered to around the $12 level.

See our full analysis for American Eagle

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Internet & Catalog Orders Revenue

Despite American Eagle’s overall poor performance throughout the last few months, there’s one thing that we’ve seen consistently increase throughout the past few years: the revenue from Internet & catalog orders. This division accounts for 15.99% of the stock price and represents the huge changes of the apparel industry. With the Internet becoming a staple of everyday life, virtually every teen apparel company has seen a steady increase in Internet orders.

We estimate that the revenue from Internet & catalog orders went from $116 million in 2005 to $401 million at the present time. We predict that this number will steadily increase, rising from $401 million to $811 million over the next six years.

This increase is certainly not unique to American Eagle. We’ve seen competitors’ Internet & catalog revenue increase for years. We predict Aeropostale’s Internet & Catalog revenue rose from $42.7 million in 2007 to $189 million at present; and that Abercrombie & Fitch’s Internet & Catalog revenue rose from $123 million in 2005 to $458 million at present.

With cotton prices returning to normal, together with the boom in online marketing, American Eagle is a company that we suggest you keep an eye on.

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