Stifel maintains American Eagle Outfitters (NYSE: AEO) at Hold following Q3 results issued Thursday night.

Analyst Richard Jaffe noted that there were signs of improvement at AEO, but the retailer is still largely in a turnaround phase. The analyst noted the following initial takeaways:

• Trends Have Continued into 4Q – Trends have continued into 4Q with comps likely declining in the mid-single digits and merchandise margins and average unit retail up vs. LY due to significantly less promotions over Black Friday weekend.
• Forgoing Sales to Drive Margin Protects Brand Integrity - Although the company has made both merchandise (improved color palette, higher quality and better outfitting) and operational (improved inventory management, closing underperforming stores, cost cutting and improving omni-channel capabilities) improvements the external environment remains difficult with weak traffic and a highly promotional retail sector. Additionally, as the company anniversaries heavy promotions, it is difficult to drive comps. While we agree with management’s desire to forgo sales somewhat while maintaining price integrity by reducing promotions, we believe this strategy could be challenging in the near-term. Our cautious outlook is due to a highly promotional holiday mall environment where companies are competing for share of the consumer’s wallet with deep discounting and our belief that the company’s merchandise assortment remains a work in progress.
• Reiterate Hold – Despite a recent uptick in sales and margin trends at AEO, we believe it is too soon to declare victory and we lack visibility that these positive trends will continue. We believe there is uncertainty surrounding both the merchandise turnaround and the CEO search. Finding a qualified CEO replacement will take time (the search for ex-CEO Hanson took nearly a year) and once a replacement is found, impact by the new CEO will take time to materialize.

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American Eagle Outfitters closed at $13.81 yesterday.