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Non-Tech : American Eagle Outfitters
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To: Jeff Briley who wrote (229)6/2/1998 2:04:00 AM
From: Dale Baker  Read Replies (1) of 325
 
Thanks for the tip. Here is the full text. I never went long and may now go short based on this view and the overall rotten market:

Eagle swoops
SHAREHOLDERS who hold $400 million (1997 sales) American Eagle Outfitters (Nasdaq: AEOS) have reason to cheer. Its stock is up ninefold from a split-adjusted $4.39 last June. Is this a mouse-tested cure for cancer? Nope. Just a 336-store chain retailer that sells casual outdoor clothing for men and women ages 16 to 34. The company has been around since 1977, selling mainly hiking clothes and gear. Six years ago the company started becoming a casual-apparel maker, a poor man's version of Abercrombie & Fitch. It markets with such gimmicks as see-through American Eagle credit cards and catalogs with horoscopes. At a recent $39 American Eagle's stock trades at 46 times trailing earnings.

Man the lifeboats. Streetwalker thinks American Eagle Outfitters is about to hit a wall. There's no way the company can continue its current 70%-plus monthly rate of same-store sales growth. With the critical back-to-school season looming, competitors, like Old Navy, are sharpening their attack on the same consumer. Abercrombie & Fitch is even considering legal action over what it claims is American Eagle's imitation of its products and its operations.

Do insiders see an end to the euphoria? CDA/Investnet's Paul Elliott, who tracks such things, says: "Potential investors considering American Eagle should bear in mind that a number of notable insiders are getting out." Among them, controlling shareholder and Chairman Jay Schottenstein (and his family). A secondary offering may be in the works. Expect this stock to drop 30% as sales growth stalls.
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