TJX TJX Companies Inc

Leading teen retailer, American Eagle Outfitters Inc. (AEO), continues to make progress with its global expansion plans entering into collaborations to spread its wings in the Americas and Asia Pacific markets. The company has signed three new licensing agreements in Central and South America and Thailand to open multiple stores in these regions.  

The first agreement is with Grupo David Enterprises that facilitates the company’s expansion into Venezuela, Caribbean Islands and Central America, with licensed stores planned to open in Panama, Costa Rica, Honduras, Guatemala, El Salvador, Nicaragua and Belize.

Under the second agreement, the company has partnered with Grupo Comercializadoras with licensed stores to be opened in Columbia of South America. The third licensing agreement with Pacifica Lifestyle Co. will enable the company to expand into the Asian continent with stores lined up for Thailand.

Licensed stores under these partnerships are expected to commence operations by the summer of 2014. Further, the company targets to open another 40 licensed stores in 2014.

Currently, American Eagle operates licensed stores in nearly 12 countries including the United Arab Emirates, Kuwait, Russian Federation, Kingdom of Saudi Arabia, Lebanon, Jordan, Morocco, Egypt, Israel, Japan, Poland, and the Philippines.

Earlier last month, American Eagle reported disappointing preliminary sales and comps results for third-quarter fiscal 2013. Net sales for the quarter dropped 6% year over year to $857 million, while it beat the Zacks Consensus Estimate of $852 million.

Including sales from its online portal, AEO direct, the company reported a comparable store sales (comps) decline of 5% compared with a 10% rise reported in the year-ago comparable quarter.

Despite the soft preliminary sales results, the company raised its adjusted earnings guidance for the third quarter to 19 cents per share, against the previously forecasted EPS range of 14–16 cents. The upside in the earnings forecast is driven by expectations of better-than-anticipated margin results and clean inventory at the end of the third quarter of fiscal 2013. The current Zacks Consensus Estimate for the third quarter is pegged at 18 cents per share, a penny short of the company’s forecast.

American Eagle is scheduled to release its third-quarter earnings results on Dec 6, 2013. Our proven model shows that American Eagle is likely to beat the Zacks Consensus Estimate this quarter because it has the right combination of the two key ingredients, namely a positive Earnings ESP and a Zacks Rank #1, 2 or 3. American Eagle currently carries an Earnings ESP of 5.56% and a Zacks Rank #3 (Hold).

Last month, the company’s closest peers including The Gap Inc. (GPS), The TJX Compnies Inc. (TJX) and Abercrombie & Fitch Co. (ANF), posted better-than-expected results with positive earnings surprise of 1.41%, 1.35% and 18.18%, respectively.

 
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