American Eagle rises on CFO departure, 77kids exit

AP News
Posted: May 21, 2012 3:08 PM
American Eagle rises on CFO departure, 77kids exit

Shares of American Eagle Outfitters Inc. climbed Monday after the teen retailer announced plans to exit its children's business and detailed the departure of Chief Financial Officer Joan Hilson.

THE SPARK: American Eagle said late Friday that it will exit 77kids, which includes 22 stores and an online business. It is exploring a potential full or partial sale of the business.

The Pittsburgh company also said that CFO Joan Hilson is stepping down at the end of July. It's the second major leadership change at American Eagle in the past few months. Former CEO James O'Donnell retired in January, with Robert Hanson, a former Levi's executive, taking over as head of the retailer.

THE ANALYSIS: Dorothy Lakner of Caris & Co. said in a client note that she wasn't overly surprised about the CFO departure because Hanson will likely want to put his own team in place now that he is at the helm. The analyst is also pleased that American Eagle is exiting 77kids, as the venture was unprofitable and its closure will give the retailer more time to focus on its core business.

Lakner says American Eagle is her favorite name in the teen sector. She kept a "Buy" rating and $26 price target.

Stifel Nicolaus' Richard Jaffe says that by eliminating the operating loss associated with 77kids, American Eagle will see its earnings per share increase.

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"We believe that it is encouraging to see CEO Hanson taking initiative to improve the profitability of the company, and focus on those business opportunities that offer the highest return potential," he wrote.

Jaffe maintained a "Buy" rating and $22 price target.

SHARE ACTION: American Eagle's stock rose $1.97, or 10.7 percent, to $20.37 in afternoon trading. The shares have more than doubled since bottoming out at $10 in early September. They are approaching their 52-week high of $21.13 set early this month.