American Eagle revenues jump, announces plan to improve profitability

Fourth quarter net revenue at American Eagle Outfitters (AEO) of 1.7 billion dollars rose 12 percent with store revenue growth of 10 percent, while digital revenue increased 19 percent.

The company also announced its new Powering Profitable Growth long-term strategy structured to deliver 5.7 to 6 billion dollars in revenue and an approximate 10 percent operating margin by the end of fiscal 2026, implying a compounded annual growth rate of mid-to-high teens for operating income and 3-5 percent for revenue growth.

“As our profit improvement initiatives took hold, we delivered a material improvement in business, underscoring the power of our brands, operations and strategic focus. Customers responded well to our strong merchandise collections fueling positive results across brands and channels,” commented Jay Schottenstein, AEO’s executive chairman and CEO.

Highlights of AEO’s fourth quarter results

Aerie brand revenue of 538 million dollars rose 16 percent with comp sales up 13 percent and American Eagle revenue of 1.1 billion dollars increased 11 percent with comp sales growing 6 percent.

The company reported GAAP gross profit of 615 million dollars and adjusted gross profit of 626 million dollars, up 23 percent, while the adjusted gross margin rate of 37.3 percent rose 340 basis points.

GAAP operating income was 9 million dollars and adjusted operating income reached 141 million dollars with adjusted operating margin of 8.4 percent, expansion of 200 basis points to last year.

GAAP diluted earnings per share were 3 cents and adjusted diluted earnings per share were 61 cents.

Review of AEO’s full year financial performance

For the full year, net revenue of 5.3 billion dollars rose 5 percent and store revenue rose 6 percent with digital revenue growth of 6 percent. Aerie brand revenue of 1.7 billion dollars rose 11 percent with comp sales up 8 percent, while American Eagle revenue of 3.4 billion dollars increased 3 percent with comp sales growing 1 percent.

GAAP gross profit was 2 billion dollars and adjusted gross profit of 2 billion dollars increased 17 percent, while adjusted gross margin of 38.7 percent rose 370 basis points.

GAAP operating income was 223 million dollars, adjusted operating income was 375 million dollars, while adjusted operating margin of 7.1 percent expanded 170 basis points to last year.

GAAP diluted earnings per share were 86 cents and adjusted diluted earnings per share were 1.52 dollars.

For fiscal 2024, AEO expects operating income in the range of 445 to 465 million dollars reflecting revenue up 2 to 4 percent to last year. For the first quarter, management expects operating income in the range of 65 to 70 million dollars, reflecting revenue increase in mid-single digits.