ANF Abercrombie and Fitch Co

As reported by Reuter, the chairman of American Eagle Outfitters, Inc. (AEO), Jay Schottenstein, repurchased 1 million shares of the company. As per the regulatory filing, Schottenstein bought the shares for about $11.2 million.

Since the announcement of its hunt for a CEO, the company has been witnessing a fall in its value, resulting in market share loss to competitors like Abercrombie & Fitch (ANF), as they head into the all-important winter-holiday selling season.

The share repurchase initiative undertaken by the company president should give positive signals to its shareholders in the light of recent controversies and hopefully recover some of the lost market value.

The report also hinted that American Eagle’s Director Michael Jessels on has also repurchased approximately 120,000 shares of the company.

Earlier, American Eagle Outfitters reported weaker-than-expected second-quarter 2011 results. Earnings in the second quarter decreased to 10 cents per share from the year-ago earnings of 13 cents per share and missed the Zacks Consensus Estimate of 11 cents a share.

Guidance

In the third quarter of fiscal 2011, the company expects to earn in the range of 22 cents to 27 cents per share.

For fiscal year 2011, the company expects earnings to be between 85 cents and 95 cents per share.

Conclusion

We remain impressed with the company’s continued momentum in denim along with improved merchandise assortments in the women’s business segment, which will likely lead to a turnaround in top line as well as a rebound in gross margin.

The company operates in a highly fragmented specialty retail sector and faces intense competition from other teenage-focused retailers, such as Gap Inc. (GPS).

 The stock currently retains a short-term Zacks #3 Rank ('Hold') rating that corresponds with our long-term Neutral recommendation on the company

 
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