The poor man's Abercrombie got a little poorer in November.
American Eagle Outfitters
, known for cut-rate preppy duds that resemble those from trendy
Abercrombie & Fitch
, had a dismal November and likely will fall short of fourth-quarter earnings estimates.
The company didn't say this explicitly, but no matter. Based on the company's 9.6% drop in November same-store sales figures, which measure activity in shops open at least a year, analysts were busy ratcheting down earnings estimates.
The Warrendale, Pa.-based company, which posted many strong sales months this year as other apparel outfits sank, posted one of the worst Novembers in its sector. The company, which released its sales data after the close of trading Wednesday, had been expected to report a modest sales drop of 1.9%, according to Thomson Financial/First Call.
On Thursday the earnings revisions came. UBS Warburg analyst Richard Jaffe lowered his estimate for the fourth quarter to 62 cents a share from 69 cents. Robertson Stephens now expects 65 cents a share, down from 68 cents. The consensus had been 68 cents a share, according to Thomson Financial/First Call.
In a prerecorded call, Laura Weil, American Eagle's chief financial officer, declined to give financial guidance, but did say that the slow retail environment that has forced an increase in promotions will continue to put "pressure on gross margins." The company blamed the shortfall on the economy and the unseasonably warm weather in November.
American Eagle shares lost 25 cents lately to trade at $25.38.
Meanwhile, some other apparel chains topped estimates. For example, turnaround favorite
eked out a 0.8% gain, while analysts had been expecting a 7.4% drop. And Abercrombie's sales dropped 5%, better than the 7.4% drop analysts expected.
For sure, American Eagle wasn't the only apparel chain to have a rough November, only the most surprising. Gap's same-store sales plummeted 25%, compared with expectations of a 17% drop, but what else is new? The company, once a blue-chip retailer, has been in turnaround mode for nearly two years and has basically become irrelevant on Wall Street.
Ann Taylor shares gained $1.65, or 5.4%, recently trading at $32.47, while Abercrombie lately gained $1.38, or 5.3%, to $27.40. Gap shares were off 73 cents to $12.85.
Analysts were willing to give American Eagle a break, as both Robertson Stephens and UBS Warburg kept their buy ratings on the stock, which was a highflier earlier this year. It climbed from the mid-single digits in the spring of last year to reach a 52-week high of $43 in May. The stock has since declined, as most other apparel chains have, and now appears remarkably cheap: it trades at just 14 times next fiscal year's estimated earnings, compared with a projected annual earnings growth rate of 21%, according to Thomson Financial/First Call. (Neither firm has an investment banking relationship with American Eagle.)
So don't go calling this outfit the next Gap just yet.