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A Light In The Tunnel For American Eagle

American Eagle Outfitters (NYSE:AEO) is an apparel and accessories retailer that operates over 1,000 stores worldwide. The Company has two main brands: American Eagle Outfitters which focuses on selling denim, shirts and shorts, and its Aerie brand, which focuses on selling personal care products for women. More recently the Company has outperformed its peers by returning roughly 12% year-to-date. That said, the retail industry has been weakening over the past year, with the likes of Gap and Urban Outfitter posting large negative returns.

The graph shows the year-to-date returns of American Eagle and its main competitors. As stated earlier, AE is outperforming its peers by returning over 12% YTD. We expect this trend to continue into 2016 as AE has been implementing new initiatives to capitalize on the losses of its competitors.

3Q Expectations

Earlier this month AE rose its Q3'2015 EPS to $0.34 vs the previous guidance of $0.31 per share. Furthermore, management expects to produce a 9% increase in comparable-store sales. The...