Aeropostale's Impact On American Eagle

American Eagle Outfitters (NYSE: AEO) reported its third-quarter results in late November, which marked an end to earnings season for the teen apparel space.

Aeropostale, By American Eagle Outfitters

In a research report dated Thursday, Anna Andreeva of Oppenheimer maintained a Perform rating on American Eagle with a $17 price target. The analyst noted that since the retailer reported its results in late November, the stock lost 10 percent but recovered as investors are banking on the fact that the retailer stands to gain from Aeropostale store closures.

Andreeva argued that out of the approximately 180 Aeropostale store closures in American Eagle's markets, half have already shut down, and the remainder will close in January. Since Aeropostale was extremely promotional in its selling, American Eagle likely lost out on selling opportunities.

Analyst's Take On American Eagle

Andreeva suggested that American Eagle took a 2–4-point hit in its comps during the third quarter given Aeropostale's promotional activity, which consisted of a 30–60 percent off sale in September and 70 percent off in November.

However, the headwind to American Eagle has since moderated and monthly comparisons will now ease which could help support American Eagle's the stock.

Finally, Andreeva hinted that American Eagle's fourth-quarter guidance which calls for a 6–11 percent earnings per share growth (excluding one-timers) may be a bit conservative, especially as it follows a high-teens percentage gain during the third quarter.

American Eagle shares closed Thursday at $18.13.

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