AP News

Ahead of the Bell: American Eagle gets upgrade

NEW YORK (AP) — A Sterne Agee analyst on Monday raised her rating for American Eagle Outfitters Inc. to "Buy" from "Neutral," citing new efforts by the teen apparel retailer's management to boost growth.

Analyst Margaret Whitfield also boosted her price target by $2 to $27.

"Plans to increase square footage domestically, combined with international initiatives and a strong product offering with better inventory management, suggest higher top-line growth and improved margins and returns," Whitfield wrote in a note to investors.

Whitfield said that if American Eagle can achieve the new financial goals set by CEO Robert Hanson, which include annual revenue growth of 7 to 9 percent, it would point to strong results down the road.

She added that the company plans to close 20 to 30 underperforming stores a year, while adding 50 to 100 new stores in key shopping mall locations, resulting in a square footage increase of 1 to 2 percent. Meanwhile, the company plans to open stores in Mexico and has licensing deals in other markets, such as the Philippines.

Whitfield also noted that company's new colors, washes and fits of denim products appear to be selling well so far this quarter, without much help of much in the way of promotional activities, when compared with other teen retailers.

American Eagle shares closed Friday at $22.95, up 50 percent since the start of the year. The stock was not trading premarket.

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