American Eagle Outfitters Inc. (NYSE: AEO) released its most recent quarterly results before the markets opened on Thursday. This company joins an increasing number of retailers that saw their earnings fall flat during the fourth quarter. Most recently we saw Dollar Tree and Kroger slip.
The retailer posted $0.44 in earnings per share (EPS) on $1.23 billion in revenue, compared with consensus estimates from Thomson Reuters that called for $0.44 in EPS on revenue of $1.21 billion. The same period of last year had EPS of $0.39 and $1.1 billion in revenue.
During the quarter, consolidated comparable sales for this period increased 8% year over year. Also for this period, as the result of recent U.S. tax legislation, the company realized $0.08 per share of tax benefit.
In terms of the outlook for the fiscal first quarter, the company expects to see EPS in the range of $0.20 to $0.22. Consensus estimates call for $0.19 in EPS on $791.55 million in revenue for the quarter.
CEO Jay Schottenstein commented on guidance:
Looking ahead to 2018, our brands are well‐positioned for growth. American Eagle is a true leader in specialty apparel, with one of the strongest jeans brands in the market, and Aerie is one of the fastest growing lifestyle brands. We started the spring season with positive momentum, positioning us well for strong results in 2018. The dividend increase we announced today reflects confidence in our business, strong free cash flow and our continued commitment to delivering returns to shareholders.
I’m pleased that we ended 2017 with a strong quarter, achieving record sales and an EPS increase over last year. In the fourth quarter we saw an acceleration in sales, continued sequential margin improvement and EPS growth that was on the high end of our guidance. The digital business continued its exceptional growth, rising over 20% in the quarter, and we were encouraged with improved brick and mortar trends, delivering positive sales comps in both American Eagle and Aerie stores.
Shares of American Eagle were last seen down 8.5% at $18.83 on Thursday, with a consensus analyst price target of $19.41 and a 52-week range of $10.23 to $20.83
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INVESTORS NOT HAPPY
The markets got their February unemployment numbers Friday morning, and they blew away expectations. The Bureau of Labor Statistics reported that nonfarm payrolls increased by 313,000 in February, above the Bloomberg consensus estimate of 205,000.
Most of this gain was seen in construction, retail trade, professional and business services, manufacturing, financial activities and mining.
Employment in other major industries, including wholesale trade, transportation and warehousing, information, leisure and hospitality, and government showed little change over the month.
At the same time, the unemployment rate was 4.1% for the fifth consecutive month, and the number of unemployed persons was essentially unchanged at 6.7 million.
Among the major worker groups, the unemployment rate for black Americans declined to 6.9% in February, while the jobless rates for adult men (3.7%), adult women (3.8%), teenagers (14.4%), whites (3.7%), Asians (2.9%) and Hispanics (4.9%) showed little change.
Despite all this, average hourly earnings actually came in below expectations, posting an increase of only 0.1%, with the year-on-year figure three-tenths below the consensus at 2.6%. Considering how strong demand is for labor, policymakers at the Federal Reserve may not want to risk runaway wage gains as employers try increasingly to attract candidates, according to Bloomberg.
President Trump has become the most effective user of Twitter in the history of the social network, using it as his favorite broadcast method to preach his views and complaints to the broadest population possible. He has been joined in one of his Twitter comments by Elon Musk, CEO of Tesla Inc. (NASDAQ: TSLA), who essentially begged the president to help his company with trade problems with China.
The exchange occurred as the president put tariffs on some steel and aluminum imports.
Donald J. Trump
China has been asked to develop a plan for the year of a One Billion Dollar reduction in their massive Trade Deficit with the United States. Our relationship with China has been a very good one, and we look forward to seeing what ideas they come back with. We must act soon!
Do you think the US & China should have equal & fair rules for cars? Meaning, same import duties, ownership constraints & other factors.
1:10 PM - Mar 8, 2018
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Replying to @elonmusk @realDonaldTrump
For example, an American car going to China pays 25% import duty, but a Chinese car coming to the US only pays 2.5%, a tenfold difference
I am against import duties in general, but the current rules make things very difficult. It’s like competing in an Olympic race wearing lead shoes.
1:24 PM - Mar 8, 2018
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Tesla has said it essentially doubled sales in China to about $1 billion last year, which makes it a very successful luxury car in the world’s largest auto market.
And Tesla has worked with the Shanghai Municipal Government to try to set up a plant in China to produce cars locally.
Most large U.S. car companies already have manufacturing facilities in China, along with large sales. In all cases, the U.S. presence is due to a Chinese rule that car companies must be majority owned by Chinese partners. Among the tension this has caused is that U.S. car companies do not control their own future in China. Some speculate that the allegiance China’s car companies have with the central government puts the fate of the U.S. companies in political hands. Others worry that Chinese car companies can steal the intellectual property of their American partners. In either case, the American manufacturers have risks they do not have in other countries.
Musk’s worries are real. He knows how to address the president in public. Twitter may become one of the most important trade tools American companies have.