What Happened:

Shares of young adult apparel retailer American Eagle Outfitters (NYSE:AEO) jumped 7.9% in the pre-market session after the company provided updated fourth quarter guidance. It reported that fourth quarter-to-date revenue, through Saturday, December 30, 2023, grew approximately 8%. The American Eagle segment grew in the high single digits, and Aerie was up in the low teens. In addition, AEO raised its fourth-quarter revenue outlook to low double digits; operating profit was raised to approximately $130 million, compared to the earlier guidance of $105 million to $115 million. The improved guidance was attributed to record-breaking holiday sales and robust merchandise margins. Management added, "This holiday season, we executed with confidence and precision, delivering winning product assortments and an exciting customer experience that showcased the strength of our brands and operations."

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What is the market telling us:

American Eagle's shares are not very volatile than the market average and over the last year have had only 15 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business. 

The biggest move we wrote about over the last year was about 2 months ago, when the stock dropped 15.6% on the news that the company reported third quarter results and provided operating income guidance for the full year that fell short of expectations. On the other hand, it beat analysts' revenue and EPS estimates this quarter, driven by better-than-expected same-store store sales growth at both American Eagle and Aerie. The stock is down, suggesting expectations for the year ahead were high heading into the quarter and the earnings beat was already priced into the stock.

American Eagle is up 1.4% since the beginning of the year. Investors who bought $1,000 worth of American Eagle's shares 5 years ago would now be looking at an investment worth $1,088.

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