American Eagle's stock plunges
American Eagle Outfitters Inc.'s shares sank Wednesday after the teen retailer reported disappointing fiscal fourth-quarter earnings and offered a first-quarter earnings forecast well below analysts' estimates.
THE SPARK: The company reported that its net income jumped 85 percent to $94.8 million, as it reduced inventory and sales improved. Adjusting for special items, it earned 55 cents per share, while analysts polled by FactSet expected 56 cents per share. Revenue was up 9 percent at $1.12 billion.
American Eagle forecast earnings of 16 to 19 cents per share in the first quarter, saying that bad weather and unfavorable economic conditions impacted consumer spending in February. Analysts were looking for earnings of 25 cents per share for the quarter.
THE BIG PICTURE: American Eagle's shares were one of the biggest decliners on the New York Stock Exchange on Wednesday. The teen retail space has proven very difficult for retailers as consumers remain fickle about where they spend their money.
THE ANALYSIS: Jefferies analyst Randal Konik kept his "Hold" rating on American Eagle. The analyst said the company had a solid end to the fiscal year, noting that its inventory levels are in great shape and it has plans to buy back shares.
But Konik said the forecast is disappointing given the strong momentum the company saw in 2012. He believes the company may have provided a conservative outlook, as he expects March will bring better weather and a sales boost from spring break.
He has a $22 price target on American Eagle shares.
SHARE ACTION: Shares fell $2.28, or 10.1 percent, to close at $20.27. The stock fell as low as $19.65 earlier in the day. It has traded between $15.20 and $23.94 in the past 52 weeks.