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American Eagle Outfitters(AEO-N)

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Why American Eagle Outfitters Was a Winner This Week

Motley Fool - Fri Sep 29, 2023

What happened

According to data compiled by S&P Global Market Intelligence, retailer American Eagle Outfitters(NYSE: AEO) was a standout stock this week. The company's shares rose almost 11% higher over the five trading days, thanks in no small part to some encouraging data on the retail security front.

So what

One current worry, among both retailers and the shareholders that own them, is the recent spate of "smash-and-grab" mob robberies of prominent store chains. Scary headlines and viral videos document seemingly organized raids on such businesses, in which they lose thousands of dollars of merchandise.

Such thievery has been cited by several publicly traded retailers as a notable drag on their business recently. Both Target and Foot Locker, to name but two, have talked up the deleterious effects of this activity.

This apparent threat might not be as strong as it appears, however. On Tuesday, the National Retail Federation released the latest version of its annual Security Survey. The Federation found that total shrinkage -- loss of inventory from numerous factors, including shoplifting -- rose to over $112 billion in 2022, from $93.9 billion the previous year.

While that's a notable increase of 19%, it isn't alarming in and of itself. That's because shrinkage tends to rise or fall in accordance with overall retail sales trends. Revealingly, the share of external theft (including organized shoplifting) to the total actually dropped a bit last year, to slightly over 36% from the 2021 figure of 37%.

Now what

The takeaway from the data is that organized retail theft is not a growing problem and, in fact, is basically remaining relatively stable. While it does leach value and resources from retailers and needs to be addressed, it isn't mushrooming into an insurmountable challenge for the nation's stores.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool recommends American Eagle Outfitters and Foot Locker. The Motley Fool has a disclosure policy.

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