Needham & Company F3Q Earnings Preview – AEO, ARO, GES, ZUMZ

Needham & Company F3Q Earnings Preview – AEO, ARO, GES, ZUMZ

Analyst, Christine Chen, said, "American Eagle Outfitters (NYSE: AEO)(Hold): At ~13x our reduced FY12 EPS estimate of $0.97, AEO is trading in-line with the sector average of ~13x and above its long term growth rate of 10% to 12%. High inventory levels, a promotional environment, a difficult sourcing environment in F2H, inconsistent product, and being caught in the middle of the triple A’s in the teen space could result in higher than expected OM pressure in FQ411 as evidenced by a deeper promotional cadence so far in November...We think AEO will meet our F3Q11 EPS estimate of $0.27 vs. $0.29 Y/Y. Our F3Q EPS estimate of $0.27 is in-line with consensus and with the high end of recently raised guidance of $0.26 to $0.27."

"Aeropostale, Inc. (NYSE: ARO)(Buy): We believe that ARO has reached an inflection point as improved inventory levels led to better than expected margins and raised guidance. At ~11x our FY12 EPS estimate of $1.32 (~10.5x x-$0.90 a share in cash), ARO is trading below the sector averages of ~13x, which we believe already discounts a worst-case scenario and lowered expectations...We think ARO will meet our F3Q EPS estimate of $0.28 vs. $0.67 Y/Y."

"Guess? (NYSE: GES)(Strong Buy): Strong global brand equity, fashion right product, and a broad product assortment (including large accessories penetration) likely provides GES pricing power to offset higher sourcing costs in F2H. At ~6.7x our FY12 EPS estimate of $3.94, GES is trading at a substantial discount to the sector average of ~13x and a discount to its long term organic growth rate of 14% to 18%, 5 year historical P/E of ~24x and prices in macro concerns about Europe. We expect long term growth should be fueled by International opportunities, Licensing, and +DD% U.S. retail square footage growth...We think GES will meet our above consensus F3Q EPS estimate of $0.75 vs. $0.75 LY, which is 2 cents above consensus and a penny above the high-end of guidance of $0.71 to $0.74."

"Zumiez, Inc. (Nasdaq: ZUMZ)(Buy): ZUMZ is one of the few growth stories in specialty retail with HSD% square footage growth, and deserves to trade at
a premium to the sector. At ~15.5x our FY12 EPS estimate of $1.35, (10x ex-cash), ZUMZ is trading above the sector average of ~13x but below its long term organic growth rate of 18% to 20% and historical forward P/E of Low30s. With a broad and shallow merchandising strategy of unique branded product and high accessories penetration, ZUMZ should be able to maintain pricing power through FY11. Given the opportunity for EPS growth driven by margin improvements and continued sales momentum, we believe ZUMZ should trade at least in-line with the mid-point of a conservative long term growth rate of 18% to 20%..We think ZUMZ will meet our F3Q11 EPS estimate of $0.42 vs. $0.40 Y/Y. Our F3Q11 EPS estimate of $0.42 is in-line with consensus."

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