Earnings Preview: American Eagle Outfitters

American Eagle Outfitters (AEO) is expected to report Q3 earnings before market open Tuesday, November 25, with a conference call scheduled for 9:00 am ET.

Guidance

Analysts are looking for a profit of 30c on revenue of $753.55M. The consensus range is 30c - 32c for EPS, and revenue of $732M - $769.74M, according to First Call. The company recently reported that October same-store sales declined 12%, and said it expects Q3 EPS 30c vs. prior guidance of 31c - 36c. The retailer also said that in the quarter it will incur an other-than-temporary impairment charge of $19.9M, or 9c per share, in connection with the valuation of investments in certain auction rate preferred securities and preferred stock. Additionally, the company will recognize net incremental unrealized losses of $21.8M through other comprehensive income in connection with the valuation of the balance of the auction rate securities portfolio. Retailers such as American Eagle have struggled as customers spend less on non-essentials.

Analyst Views

Credit Suisse analysts Michael Exstein and Gary Balter say retailers are in for a bad holiday season with no recovery until 2010. As for SSS, the analysts say comps will be low and they will only begin to improve after excess square footage is gone. At the same time, an analyst at Susquehanna notes that while its October performance was hampered by inconsistent and negative trends in shopper traffic, it "emphasizes a strong value message" with its buy-one, get-one 50% off promotion. The analyst notes that American Eagle has well-managed inventories, stringent control of expenses, value positioning and a solid balance sheet.