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Non-Tech : American Eagle Outfitters
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To: Ron Kline who wrote (274)11/17/1999 1:58:00 PM
From: Chuzzlewit  Read Replies (1) of 325
 
Ron,

I agree, it was a very strong report.

After more than doubling this year, shares of American Eagle slid after talk that it boosted same-store sales by counting merchandise it sold to discount retailers ...

On the face of it, this doesn't make sense because cash and short-term investment accounts increased by $71.8MM over last year. It's hard to tell how much came from operations -- a portion came from the sale of stock because there are around 1.2MM additional shares outstanding and we haven't been provided with a detailed cash flow statement. When you couple that with the fact that quarterly gross margins have increased from 40.5% to 43% yoy I don't see the rationale behind the fear.

... as well as scuttlebutt about the company not building up enough inventory for its busy fourth quarter.

This argument, on the other hand, seems to have some merrit. Inventories increased by 9% yoy. This does seem to be bothersome because it could constrain growth. If you express it in terms of inventory per square foot you get $47.82 for October 1998 and $41.15 for October 1999 -- a decrease of nearly 14%. Of course, it may simply be a matter of timing. There might well have been another $20MM in inventory in transit.

I'm not a retail expert, so take my comments with several grains of salt. I am long AEOS.

TTFN,
CTC
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