1 / 40

Presented By Richie Hartz, Yongxiang Mao, Kaidi Wang November 15 th , 2012

Presented By Richie Hartz, Yongxiang Mao, Kaidi Wang November 15 th , 2012. Agenda. Investment History and Performance Review of the Company and its Business Industry and Competitor Analysis Relevant Stock Market Prospects Financial Analysis Financial Projections

conan-ashley
Download Presentation

Presented By Richie Hartz, Yongxiang Mao, Kaidi Wang November 15 th , 2012

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Presented ByRichie Hartz, Yongxiang Mao, Kaidi WangNovember 15th, 2012

  2. Agenda Investment History and Performance Review of the Company and its Business Industry and Competitor Analysis Relevant Stock Market Prospects Financial Analysis Financial Projections Application of Valuation Tools Recommendation

  3. Investment History and Performance • Transaction history • Dec 1999 – Buy 200 @ $44 • Jan 2000 – Buy 200@ $27 • Mar 2000 – Buy 600 @ $15.63 • Feb 2001 – 3:2 Split • Mar 2005– 2:1 Split • Apr 2005 – Sell 600 @ $26.284 • Nov 2005 – Sell 700@ $23.33 • Nov 2006 – Sell 400 @ $47.15 • Dec 2006 – 3:2 Split • Nov 2007 – Sell 450 @ $22 • Dec 2008 – Buy 1000 @ $9.07 • Nov 2010 – Sell 500 @ $17.00 • Apr 2011 – Sell 500 @ $16.04 • Current Price: $19.34 • Current Position: Long 1500 shares of AEO with a weighted average price of $5.2252 As of November 14, 2012 Source: Yahoo! Finance

  4. Equity Snapshot Unrealized Capital Gain: 273.96% Annualized Capital Gain: 21.22% Year-to-date ROE: 42% Red indicates that AEO missed quarterly analyst expectations for earnings and revenue and green indicates that AEO beat analyst expectations. Source: Yahoo! Finance

  5. Business Overview Opened in 1977, American Eagle designs, markets, and sells apparel throughout the United States and Canada. Their online retail website ships to more than 75 countries.

  6. A Brief History 1977 – The first AE store opens • The first AE store opens in Twelve Oaks Mall in Novi, MI 1994 – AE goes public • Initial public offering of 2.1 million shares on the Nasdaq under “AEOS” symbol, and was moved to the NYSE with ticker “AEO” in 2007 1999 – First flagship store • American Eagle opens its first flagship store in downtown San Francisco 2000 – AE opens its 500th store • Annual sales surpass $1 billion on 2001 2001 – AE crosses the border to Canada 2006 – aerie launched nationwide 2010 – AE goes global • AE kicks off its international expansion with its first store in Dubai, closely followed by stores in Kuwait, Hong Kong, Russia and Shanghai Source: AEO website, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-history

  7. Company Profile • Three operating segments • U.S. and Canadian AE retail stores: 908 • Aerie stand-alone retail stores: 155 • AEO Direct-Online business: 77 countries Employees: 34,900 Yearly Revenue: $2.99 Billion Headquarters in Pittsburgh, PA 39 International Franchise stores Source:10-Q

  8. Famous For

  9. Company Overview - Supply Chain Source: AE Better World, corporate website, http://www.ae.com/Images/corpResp/AEBetterWorldNew.pdf

  10. Company Overview - Supplier Regions Made in Vietnam, India, Guatemala, and China. Source: AE Better World, corporate website, http://www.ae.com/Images/corpResp/AEBetterWorldNew.pdf

  11. Growth Drivers • Internal development of new brands: aerie • Relationship and conditions of vendors • Performance during back-to-school and year-end holiday sales periods • Global expansion • Number and timing of new stores; existing store remodels and expansions • Acceptability of seasonal merchandise offerings • Timing and level of markdowns • Store closings and remodels • Competitive factors, weather and general economic conditions Source: 10-K

  12. Holiday Sales Quarterly EPS is not exactly correlated with revenue. After phasing out underperforming 77kids and Martin+OSA, management hopes to improve EPS for this holiday season. Revenue is cyclically strong around the November/December period, as well as during the back-to-school season. Source: 10-K

  13. SWOT Analysis Source: COMPANY PROFILE, American Eagle Outfitters, Inc., Marketline

  14. Business Strategy Source: Corporate Website, Investor Presentation, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  15. Business Strategy-Factory Store Opportunities Source: Corporate Website, AE_Investor_Presentation_10.01.12, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  16. Recent Events - Exit of 77kids • 77kids brand introduced online in 2008, and then became bricks and mortar with 22 stores • In 2012, announcement to exit children’s business (77kids) • After-tax loss of $24 million on sales of $40 million in fiscal 2011 • $28.2 million loss from discontinued operations (1.84% of net sales), net of tax, for the 26 weeks ended July 28, 2012 (3.22% for 13 weeks ended) Source: 10-K, 10-Q, Press Release, Corporate website

  17. Exit of 77 kids Source: Corporate Website, Supplemental Financial Tables, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  18. Business Strategy-Franchisees • Introduction of first international stores • Middle East (Dubai and Kuwait City) - Mar 11, 2010 • Physically present in 13 countries • 39 international franchise stores in 12 countries on July 28, 2012 (compared with 9 one year ago) • Middle East, Northern Africa, Eastern Europe, Hong Kong, China, Israel and Japan • Ship online to 77 countries internationally at the close of 2012 • 49 at the end of Fiscal 2012, including 28 new franchise stores this year • Agreements with regional leading international retailer and franchise operator • No capital investment & minimal operational involvement • Partners handle local operational functions • Royalty revenue generated based upon a percentage of merchandise sales by the franchisee Source: Corporate Website , Press Release, 10-K, 10-Q,

  19. Growth of Stores Source: Second Quarter 2012 Financial Results Presentation, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  20. Macroeconomic Review Disposable Personal Income Source :http://www.advisorperspectives.com/dshort/updates/DPI-Monthly-Update.php

  21. Macroeconomic Review Retail Sales Changes & Consumer Confidence Source: http://dailycapitalist.com/2012/01/31/income-and-spending-slowed-to-a-crawl-in-2011/

  22. Industry Review United States apparel retail industry value: $ million, 2007–11(e) Source:Apparel Retail in the United States , June 2012, MarketLine

  23. Industry Review US apparel retail industry value forecast: $ million, 2011 –16 Source:Apparel Retail in the United States , June 2012, MarketLine

  24. Porter’s Five Forces Model Source:Apparel Retail in the United States , June 2012, MarketLine

  25. Competitors Source: Capital IQ, Corporate Website

  26. Relevant stock market prospect Source: Yahoo! Finance

  27. Relevant stock market prospect Source: Yahoo! Finance

  28. Financial Analysis • Revenue source • AE Retail Sales • AE Direct • International franchisee royalty (In million)

  29. Revenue - Geographically Financial Analysis (In millions) Source: 10-K, Capital IQ

  30. Financial Analysis Sales/Sq. Ft. Owned/Operated (Net) vs. Sales/ Store (Net) Source: 10-K

  31. Financial Analysis Margin Analysis Source: Capital IQ

  32. Financial Analysis • Capital Expenditure • Fiscal 2011 capital expenditures were $100.1 million, compared to $84.3 million in Fiscal 2010. Source: 10-K

  33. Financial Projection - Revenue (In millions except for Sales / Square Foot) • Other revenue includes revenue from AEO Direct and royalty revenue from franchise stores • Revenue from Retail Sales=Sales/Square Foot ×Total Square Feet

  34. Financial Projection - Gross Margin Analysis • Phase out 77 kids • Transition to factory and online stores • Improve markdowns • Decrease occupancy and warehousing costs with higher comparable store sales and efficient inventory management Increase in material and labor costs remains to be a threat Source: 10-K

  35. Financial Projection - Gross Margin Analysis Source: Second Quarter 2012 Financial Results Presentation, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  36. Financial Projection - Sale Growth Analysis 15% increase in sales for AEO Direct in Fiscal 2011 Source: Second Quarter 2012 Financial Results Presentation, http://phx.corporate-ir.net/phoenix.zhtml?c=81256&p=irol-homeprofile

  37. DCF Valuation (In millions except for share price)

  38. Market Multiples Analysis Source: Capital IQ, Company Filings, I/B/E/S

  39. Recommendation Hold the position of 1500 shares. Current Share Price: $19.34 DCF Implied Price: $19.96 Market Multiples Price: $21.01

  40. Recommendation • Next earnings on November 26th, possibility for growth. • ANF beat earnings and revenue estimates on November 14th. • Other earnings to watch: GPS (November 15), ARO (November 29). • Anticipate high revenue in the coming holiday season. • Be aware of industry trends indicating strength or weakness in retail performance.

More Related