What Could Drive American Eagle Outfitters Stock Going Forward?



Year-to-date movement

As of May 21, American Eagle Outfitters (AEO) stock had risen 21.1% year-to-date. In comparison, Abercrombie & Fitch (ANF) and Urban Outfitters (URBN) had rise 50.4% and 20.6%, respectively, while Gap (GPS) had fallen 6.9%. The S&P 500 had risen 2.2%.

The stock price could sustain its momentum, as analysts are upbeat about its upcoming first-quarter results. Analysts expect top- and bottom-line growth of 5.7% and 37.5%, respectively.

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Apparel retailers’ strategic efforts, including focusing on digital, revamping merchandise, and improving operational efficiency, have yielded their desired results. In the holiday quarter, American Eagle’s digital sales grew 20%, representing a 12th successive quarter of double-digit growth. Both the Aerie and American Eagle brands have strengthened. Launched in 2006, Aerie is already a force to reckon with in the intimate apparel space. To appeal to Millenials, it has done away with retouching images and has hired plus-sized models. Also, management is confident that the American Eagle brand’s next $1 billion will be driven by bottoms sales and loyalty membership.

 A look at dividend yields

American Eagle Outfitters is also attractive to investors due to its attractive dividend policy. American Eagle Outfitters’ dividend yield (the cash flow an investor receives for each dollar invested in a company’s stock), based on its May 21 closing price of $22.77 is 2.4%. In comparison, Abercrombie & Fitch’s dividend yield is ~3.0% and Gap’s is 3.1%. Urban Outfitters doesn’t pay dividends.


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