Back to top

Image: Bigstock

American Eagle (AEO) Benefits From Digitization Strategy

Read MoreHide Full Article

American Eagle Outfitters, Inc. (AEO - Free Report) has been aggressively adopting strategies and making planned investments to expand its e-commerce and omnichannel platforms, in the wake of the digital boom. The company has been witnessing strong digital demand, driven by superior product assortments and digital acceleration to provide consumers with the facility of quick and easy access to its products and brands.

This led to consolidated digital sales growth of 35% in fourth-quarter fiscal 2020, with a 75% increase for Aerie and 20% for AE. Overall, online sales contributed nearly 45% of the company’s revenues during the said quarter. It also tested the same-day delivery option during the fiscal fourth quarter and is likely to expand this facility to 50 markets in the next few months.

Other notable players with a strong online presence are Nordstrom (JWN - Free Report) , PVH Corp. (PVH - Free Report) and DICK'S Sporting Goods (DKS - Free Report) . PVH Corp.’s digital sales surged more than 60% year over year in fourth-quarter fiscal 2020. E-commerce sales for Nordstrom grew 24% in fourth-quarter fiscal 2020, representing 54% of overall sales.  Also, e-commerce sales for DICK'S Sporting soared 57% year over year, accounting for nearly 32% of net sales in fourth-quarter fiscal 2020.

What’s More?

Strength in American Eagle’s Aerie brand remains a growth driver. Notably, sales rose 25% for Aerie, driven by solid digital demand and strength in key categories such as jeans and bottoms. This marked the 25th successive quarter of double-digit growth for the Aerie brand. Further, Aerie comps grew 29% year over year in the reported quarter. Encouragingly, it launched a new activewear collection, namely OFFLINE, and received positive customer response. Also, management earlier revealed plans of opening 60 Aerie locations, which include 25 to 30 OFFLINE stores. Such upsides are likely to enable the brand to reach the next brand milestone of $2 billion in sales.

Driven by the solid performance of the Aerie brand and a robust online show, the company delivered impressive fourth-quarter fiscal 2020 results. Also, smooth progress on the Real Power, Real Growth value-creation plan contributed to quarterly growth. As a result, management remains optimistic about fiscal 2021. It projected first-quarter fiscal 2021 revenues and operating income to exceed the first-quarter levels of both 2020 and 2019.

However, it is grappling with soft mall traffic and store closures stemming from the COVID-19 situation. This led to sluggish store revenues to the tune of 20% in the fiscal fourth quarter. Notably, store revenues fell for both brands, given the significant impacts of the pandemic. Apart from these, the company is incurring extra expenses related to performance-based incentive compensation.

Wrapping Up

Markedly, shares of this Zacks Rank #3 (Hold) company have appreciated 43.7% over the past three months, courtesy of its robust business strategies. In the said period, the industry grew 15.3%. Meanwhile, the Zacks Consensus Estimate for the company’s fiscal 2021 earnings has moved up 15.4% over the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>