Stifel keeps American Eagle Outfitters (NYSE: AEO) at Hold following Q1 results and outlook.

Analyst Richer Jaffe noted that AEO reported Q1 EPS of $.02, versus his estimate of a break even loss. With EPS down 89 percent over last year, the analyst thinks ...weakness was driven by poor customer response to the company’s important core and core fashion merchandise, which together account for 80% of total sales. Additionally, weak traffic and a highly promotional retail environment further exacerbated the situation.

Management’s outlook is very cautious regarding 2Q, as they are guiding to a breakeven quarter. Given the continued challenges facing American Eagle both in terms of self-inflicted merchandise misses and a difficult retail environment, this seems appropriate, Jaffe noted.

Bottom line: Looking forward, we believe visibility for the turnaround of the business is hazy. 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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Shares of American Eagle Outfitters closed at $11.33 yesterday.