Jim Cramer Recently Discussed These 15 Stocks

9. American Eagle Outfitters, Inc. (NYSE:AEO)

Number of Hedge Fund Holders: 35

American Eagle Outfitters, Inc. (NYSE:AEO) was called out for its weak financials, including a steep inventory write-off and disappointing sales. Cramer expressed caution, referencing past missteps and warning investors about trusting turnaround promises from the company:

“Next up, American Eagle. I should say next down American Eagle because this has smaller- This one had a miserable quarter.

Sales down 5% year-over-year. Same store sales down 3%. Gross margin off its target by 1,100 basis points. I don’t even know how you do that. This next quarter looks no better. They’re guiding for a 5% revenue shrinkage again.

Now American Eagle is beset with problems. […] CEO Jay Schottenstein started his conference call by saying the results were disappointing. $75 million inventory write-off  which contributed to a $68 million operating loss. They had product misses, too. Too much inventory and were highly promotional to get the stuff off the floor.

Strangely, even though the business is awful, American Eagle initiated a $200 million accelerated share buyback and separately bought $31 million of stock in the open market. If I were them, I’d be a little more cherry with these repurchases.

Company doesn’t have all that much money in the bank, $88 million in cash at the end of April. If you’re a retailer, you need to have some more flexibility. Look, if you’re wrong, I think you’re flushing $200 million worth of flexibility down the drain here.

This is not my first rodeo with American Eagle. My charitable trust took a very big hit in the stock a few years ago when they held on. We held on way too long because they promised one good quarter after another and they could not deliver. It was a nightmare. I am not inclined to give them the benefit of the doubt again. Fool me once, shame on you. Fool me twice, shame on me.”

American Eagle Outfitters, Inc. (NYSE:AEO) owns casualwear brands American Eagle and Aerie, targeting teens and young adults with denim, basics, and intimates.