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Why Is American Eagle (AEO) Down 18.3% Since Last Earnings Report?
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A month has gone by since the last earnings report for American Eagle Outfitters (AEO - Free Report) . Shares have lost about 18.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Eagle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
American Eagle Q3 Earnings and Revenues Top Estimates
American Eagle reported third-quarter fiscal 2021 results, wherein both earnings per share and revenues not only beat the Zacks Consensus Estimate but also improved year over year. Results gained from robust consumer demand for its merchandise and brands, and execution of the “Real Power. Real Growth.” Plan. The plan is driving profitability through real estate and inventory optimization efforts, omni-channel and customer focus, and investments to improve the supply chain.
Q3 Details
Adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of 60 cents. The bottom line increased substantially from earnings of 35 cents reported in third-quarter fiscal 2020.
Total net revenues of $1,274.1 million increased 24% year over year and beat the Zacks Consensus Estimate of $1,229 million. The top line improved 19% from third-quarter fiscal 2019. Revenue growth was driven by sustained momentum across its brands and channels.
Brand-wise, revenues increased 21% to $941 million for AE, while it surged 28% to $315 million for Aerie. This marked the 28th consecutive quarter of double-digit revenue growth for Aerie, driven by strong demand and higher full-price sales. Aerie brand sales were partly marred by the factory closures in Vietnam, which created product delays. AE brand revenues benefited from strong back-to-school sales, along with inventory optimization and promotional discipline.
The company’s digital revenues were up 10% year over year, while the same surged 42% from third-quarter fiscal 2019. Store revenues improved 29% year over year owing to increased store traffic. Store sales were up 9% as compared to third-quarter fiscal 2019.
Gross profit climbed 36% year over year to $565 million, while gross margin expanded 410 basis points (bps) to 44.3%. The upside can be attributed to leverage on rent and delivery, strong product demand, higher full-priced sales, reduced promotions and progress on the inventory optimization initiatives. This was partly negated by higher freight costs. Incremental freight costs hurt Aerie’s operating margin performance by $5 million (or 170 bps) in the fiscal third quarter.
Selling, general and administrative (SG&A) expenses advanced 14.9% year over year to $313.9 million, owing to higher store payroll, new store openings and rising advertising costs. As a percentage of sales, S&A expense contracted 190 bps to 24.6% on the back of solid revenue growth.
Operating income in the fiscal third quarter was $210 million, up 118.8% from $96 million in the year-ago quarter. Operating income for the Aerie brand improved 46%, while the AE brand reported growth of 68%. Operating margin expanded 660 bps to 16.5% from third-quarter fiscal 2020 adjusted operating margin levels. The growth resulted from 200-bps and 780-bps operating margin expansion at the Aerie and AE brands, respectively.
Other Financial Details
American Eagle ended the quarter with cash and cash equivalents of $740.7 million. Total shareholders’ equity as of Oct 30, 2021 was $1,396.7 million.
The company’s capital expenditure was $58 million in the reported quarter. For fiscal 2021, management anticipates capital expenditures to be at the lower end of $250-$275 million, with investments in strategic customer-facing channels and supply chain.
Concurrent to the earnings release, the company declared a quarterly cash dividend of 18 cents per share. The dividend is payable on Dec 29 to shareholders of record as on Dec 10.
Store Update
In third-quarter fiscal 2021, American Eagle inaugurated three AE and 25 Aerie stand-alone stores. The company remodeled and refurbished two stores in the fiscal third quarter.
At the end of the quarter, American Eagle operated 1,121 stores, comprising 897 AE, 216 Aerie stand-alone, 187 Aerie side-by-side and three Todd Synder stores. Additionally, it operated 256 international license outlets.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -13.06% due to these changes.
VGM Scores
At this time, American Eagle has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Eagle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is American Eagle (AEO) Down 18.3% Since Last Earnings Report?
A month has gone by since the last earnings report for American Eagle Outfitters (AEO - Free Report) . Shares have lost about 18.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is American Eagle due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
American Eagle Q3 Earnings and Revenues Top Estimates
American Eagle reported third-quarter fiscal 2021 results, wherein both earnings per share and revenues not only beat the Zacks Consensus Estimate but also improved year over year. Results gained from robust consumer demand for its merchandise and brands, and execution of the “Real Power. Real Growth.” Plan. The plan is driving profitability through real estate and inventory optimization efforts, omni-channel and customer focus, and investments to improve the supply chain.
Q3 Details
Adjusted earnings of 76 cents per share beat the Zacks Consensus Estimate of 60 cents. The bottom line increased substantially from earnings of 35 cents reported in third-quarter fiscal 2020.
Total net revenues of $1,274.1 million increased 24% year over year and beat the Zacks Consensus Estimate of $1,229 million. The top line improved 19% from third-quarter fiscal 2019. Revenue growth was driven by sustained momentum across its brands and channels.
Brand-wise, revenues increased 21% to $941 million for AE, while it surged 28% to $315 million for Aerie. This marked the 28th consecutive quarter of double-digit revenue growth for Aerie, driven by strong demand and higher full-price sales. Aerie brand sales were partly marred by the factory closures in Vietnam, which created product delays. AE brand revenues benefited from strong back-to-school sales, along with inventory optimization and promotional discipline.
The company’s digital revenues were up 10% year over year, while the same surged 42% from third-quarter fiscal 2019. Store revenues improved 29% year over year owing to increased store traffic. Store sales were up 9% as compared to third-quarter fiscal 2019.
Gross profit climbed 36% year over year to $565 million, while gross margin expanded 410 basis points (bps) to 44.3%. The upside can be attributed to leverage on rent and delivery, strong product demand, higher full-priced sales, reduced promotions and progress on the inventory optimization initiatives. This was partly negated by higher freight costs. Incremental freight costs hurt Aerie’s operating margin performance by $5 million (or 170 bps) in the fiscal third quarter.
Selling, general and administrative (SG&A) expenses advanced 14.9% year over year to $313.9 million, owing to higher store payroll, new store openings and rising advertising costs. As a percentage of sales, S&A expense contracted 190 bps to 24.6% on the back of solid revenue growth.
Operating income in the fiscal third quarter was $210 million, up 118.8% from $96 million in the year-ago quarter. Operating income for the Aerie brand improved 46%, while the AE brand reported growth of 68%. Operating margin expanded 660 bps to 16.5% from third-quarter fiscal 2020 adjusted operating margin levels. The growth resulted from 200-bps and 780-bps operating margin expansion at the Aerie and AE brands, respectively.
Other Financial Details
American Eagle ended the quarter with cash and cash equivalents of $740.7 million. Total shareholders’ equity as of Oct 30, 2021 was $1,396.7 million.
The company’s capital expenditure was $58 million in the reported quarter. For fiscal 2021, management anticipates capital expenditures to be at the lower end of $250-$275 million, with investments in strategic customer-facing channels and supply chain.
Concurrent to the earnings release, the company declared a quarterly cash dividend of 18 cents per share. The dividend is payable on Dec 29 to shareholders of record as on Dec 10.
Store Update
In third-quarter fiscal 2021, American Eagle inaugurated three AE and 25 Aerie stand-alone stores. The company remodeled and refurbished two stores in the fiscal third quarter.
At the end of the quarter, American Eagle operated 1,121 stores, comprising 897 AE, 216 Aerie stand-alone, 187 Aerie side-by-side and three Todd Synder stores. Additionally, it operated 256 international license outlets.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -13.06% due to these changes.
VGM Scores
At this time, American Eagle has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, American Eagle has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.