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No. of Recommendations: 4
I own small positions in this retailer taken ahwile back. This retailer had stellar results from 2003-7. The finanacials and balance sheet were exceptional during that period. When the stock dropped in 2008 I decdied to take an initial position in what appeared to be a well estalished business model. Since then the results have been quite dissappointing. AEO was hit by the recession and also lost share to competitors such as Aeropostale and ANF. I have held on through a long string of bad sales reports. The balance sheet has remained rock solid with no long term debt and over $500 MM in cash. But net profit margin (one of my key metrics) has been chopped in half. The company has been the subject of repeated rumors of private equity buy-outs.

AEO reported stronger than expected sales very recently:

and the company has a new CEO following retirement of the previous one.
The market has been applauding:

The stock has risen from a low of 10 to about 14, which is 13.5x forward earnings.

AEO has essentially all of its sales in the US and Canada. The company took some early steps for interntational expansion in 2010 but this is largely in Asia and is quite small at present.

Meanwhile competitor ANF has fallen sharply as its European results take a sharp toll.

I am not adding to AEO at this point. My largest retail positions remain in the classics, COH, NKE and BKE.

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