We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
American Eagle (AEO) Beats Q4 Earnings & Revenue Estimates
Read MoreHide Full Article
American Eagle Outfitters, Inc. (AEO - Free Report) reported top and bottom-line beat in fourth-quarter fiscal 2023, driven by brand strength and solid demand. Earnings and revenues also increased year over year.
The company’s fourth-quarter fiscal 2023 adjusted earnings of 61 cents per share rose 64.9% year over year and surpassed the Zacks Consensus Estimate of 50 cents.
Total net revenues of $1,678.9 million improved 12% year over year, beating the Zacks Consensus Estimate of $1,663 million. Revenues included a $57-million contribution from the additional 53rd week in the quarter, which aided revenue growth by four points. Revenue growth was driven by rising brand momentum and improvements across channels, as well as a successful holiday season. Store revenues grew 10% in the quarter, while digital revenues improved 19%.
Shares of the Zacks Rank #1 (Strong Buy) company have gained 10.8% in the past three months compared with the industry’s growth of 13.7%.
Image Source: Zacks Investment Research
Quarterly Details
Brand-wise, revenues increased 11% year over year to $1,066.1 million for American Eagle and beat our estimate of $1,056.2 million. Comps for the American Eagle brand rose 6%, reflecting continued sequential growth. American Eagle brand sales benefited from improvements in its assortments.
Revenues advanced 16% year over year to $537.5 million for the Aerie brand in the fiscal fourth quarter and outpaced our estimate of $520 million. This marked the brand’s all-time high fourth-quarter revenues. Comps for the Aerie brand improved 13%. Sturdy demand in its core apparel and strength in the OFFLINE brand, both of which posted double-digit growth, aided growth.
American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise
Adjusted gross profit increased 23% year over year to $615 million in the fiscal fourth quarter. The adjusted gross margin expanded 340 basis points (bps) to 37.3%. The increase in the adjusted gross margin mainly stemmed from strong demand, reduced product and freight costs, and gains from profit improvement initiatives, which led to lower markdowns, and leverage on rent, distribution, and warehousing and delivery expenses.
Adjusted gross profit for the quarter surpassed our estimate of $615.1 million, which suggested year-over-year growth of 21.2%. We estimated the gross margin to expand 340 bps year over year to 37.3%, backed by a decline in the cost of sales rate due to lower freight expenses.
SG&A expenses rose 22% year over year to $427 million, almost in line with our estimate. As a percentage of sales, SG&A expenses increased 190 bps to 25.4%. About half of the increase in SG&A expenses resulted from higher incentive compensation compared with zero accruals last year. Additionally, higher store and corporate compensation, advertising, and an extra week led to SG&A deleverage. Our model had predicted a SG&A rate of 25.9% for the fiscal fourth quarter, indicating an increase of 240 bps year over year.
Adjusted operating income was $141 million in the quarter, surpassing our estimate of $130.3 million. The adjusted operating margin of 8.4% expanded 200 bps year over year. Our model predicted operating margin growth of 150 bps to 7.9%. The rise in the operating margin was aided by strong sales growth and an improved gross margin rate, offset by SG&A deleverage.
For Aerie, operating income of $87.1 million increased 53.6% year over year and surpassed our estimate of $66.3 million. The AE brand’s operating income increased 18.2% year over year to $181.6 million in the quarter under review, surpassing our estimate of $176.5 million.
Other Financial Details
American Eagle ended fiscal 2023 with cash and cash equivalents of $354.1 million, with no outstanding debt. Total shareholders’ equity as of Feb 3, 2023, was $1,736.8 million.
Capital expenditure was $39 million in the fourth quarter and $174 million in fiscal 2023. It expects a capital expenditure of $200-$250 million for fiscal 2024.
Inventory rose 9% year over year to $641 million, driven by continued inventory discipline. Inventory units moved up 11%.
Guidance
For fiscal 2024, revenues are likely to rise 2-4% year over year, including a one-point negative impact of one less week compared to the last year. Operating income is estimated to be $445-$465 million.
AEO expects SG&A expenses to be flat year over year, remaining at the low end of its revenue outlook. Additionally, the company expects SG&A leverage for fiscal 2024, driven by ongoing cost management initiatives. The company expects a D&A of $220 million for fiscal 2024. The company anticipates the tax rate in the high 20s for fiscal 2024.
Additionally, the company anticipates comps growth to be stronger in the first half of fiscal 2024 and in the mid-single digits. It estimates comps growth in the low-single digits for the second half of fiscal 2024.
American Eagle expects the business momentum to continue in the fiscal first quarter. The company anticipates year-over-year revenue growth in the mid-single digits, including a one-point positive impact from the retail calendar shift. The revenue guidance includes a gain of $15 million from improved volume during the spring week. Operating income is projected to be $65-$70 million in the fiscal first quarter.
Management expects SG&A expenses to increase in line with sales in the fiscal first quarter. The company expects SG&A to leverage in the fiscal second quarter, driven by its profit improvement initiatives.
Long-Term Strategy
Concurrent with the earnings release, the company revealed its new Powering Profitable Growth plan, which is likely to build upon the strength displayed in fiscal 2023. The plan is designed to deliver annual operating income expansion in the mid-to-high teens, with a 10% operating margin over the next three years. The plan also targets 3-5% annual revenue growth through the end of fiscal 2026. This indicates revenues of $5.7-$6.0 billion and a 10% operating margin by the end of fiscal 2026.
Other Key Picks
Here are some other top-ranked stocks that investors can consider, namely The Gap Inc. (GPS - Free Report) , Deckers Outdoor (DECK - Free Report) and Abercrombie & Fitch (ANF - Free Report) .
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. GPS currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s current financial-year earnings suggests growth of 385% from the year-ago reported figure. GPS has a trailing four-quarter earnings surprise of 137.9%, on average.
Deckers Outdoor, a leading designer, producer and brand manager of innovative, niche footwear and accessories, currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 15.7% and 38.6% from the year-ago period’s actuals, respectively. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
Abercrombie, a specialty retailer of premium, high-quality casual apparel for men, women and kids, currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Abercrombie’s current financial year’s earnings suggests an increase of 3.2% from the year-ago reported figure. ANF has a trailing four-quarter earnings surprise of 715.6%, on average.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
American Eagle (AEO) Beats Q4 Earnings & Revenue Estimates
American Eagle Outfitters, Inc. (AEO - Free Report) reported top and bottom-line beat in fourth-quarter fiscal 2023, driven by brand strength and solid demand. Earnings and revenues also increased year over year.
The company’s fourth-quarter fiscal 2023 adjusted earnings of 61 cents per share rose 64.9% year over year and surpassed the Zacks Consensus Estimate of 50 cents.
Total net revenues of $1,678.9 million improved 12% year over year, beating the Zacks Consensus Estimate of $1,663 million. Revenues included a $57-million contribution from the additional 53rd week in the quarter, which aided revenue growth by four points. Revenue growth was driven by rising brand momentum and improvements across channels, as well as a successful holiday season. Store revenues grew 10% in the quarter, while digital revenues improved 19%.
Shares of the Zacks Rank #1 (Strong Buy) company have gained 10.8% in the past three months compared with the industry’s growth of 13.7%.
Image Source: Zacks Investment Research
Quarterly Details
Brand-wise, revenues increased 11% year over year to $1,066.1 million for American Eagle and beat our estimate of $1,056.2 million. Comps for the American Eagle brand rose 6%, reflecting continued sequential growth. American Eagle brand sales benefited from improvements in its assortments.
Revenues advanced 16% year over year to $537.5 million for the Aerie brand in the fiscal fourth quarter and outpaced our estimate of $520 million. This marked the brand’s all-time high fourth-quarter revenues. Comps for the Aerie brand improved 13%. Sturdy demand in its core apparel and strength in the OFFLINE brand, both of which posted double-digit growth, aided growth.
American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise
American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. Quote
Adjusted gross profit increased 23% year over year to $615 million in the fiscal fourth quarter. The adjusted gross margin expanded 340 basis points (bps) to 37.3%. The increase in the adjusted gross margin mainly stemmed from strong demand, reduced product and freight costs, and gains from profit improvement initiatives, which led to lower markdowns, and leverage on rent, distribution, and warehousing and delivery expenses.
Adjusted gross profit for the quarter surpassed our estimate of $615.1 million, which suggested year-over-year growth of 21.2%. We estimated the gross margin to expand 340 bps year over year to 37.3%, backed by a decline in the cost of sales rate due to lower freight expenses.
SG&A expenses rose 22% year over year to $427 million, almost in line with our estimate. As a percentage of sales, SG&A expenses increased 190 bps to 25.4%. About half of the increase in SG&A expenses resulted from higher incentive compensation compared with zero accruals last year. Additionally, higher store and corporate compensation, advertising, and an extra week led to SG&A deleverage. Our model had predicted a SG&A rate of 25.9% for the fiscal fourth quarter, indicating an increase of 240 bps year over year.
Adjusted operating income was $141 million in the quarter, surpassing our estimate of $130.3 million. The adjusted operating margin of 8.4% expanded 200 bps year over year. Our model predicted operating margin growth of 150 bps to 7.9%. The rise in the operating margin was aided by strong sales growth and an improved gross margin rate, offset by SG&A deleverage.
For Aerie, operating income of $87.1 million increased 53.6% year over year and surpassed our estimate of $66.3 million. The AE brand’s operating income increased 18.2% year over year to $181.6 million in the quarter under review, surpassing our estimate of $176.5 million.
Other Financial Details
American Eagle ended fiscal 2023 with cash and cash equivalents of $354.1 million, with no outstanding debt. Total shareholders’ equity as of Feb 3, 2023, was $1,736.8 million.
Capital expenditure was $39 million in the fourth quarter and $174 million in fiscal 2023. It expects a capital expenditure of $200-$250 million for fiscal 2024.
Inventory rose 9% year over year to $641 million, driven by continued inventory discipline. Inventory units moved up 11%.
Guidance
For fiscal 2024, revenues are likely to rise 2-4% year over year, including a one-point negative impact of one less week compared to the last year. Operating income is estimated to be $445-$465 million.
AEO expects SG&A expenses to be flat year over year, remaining at the low end of its revenue outlook. Additionally, the company expects SG&A leverage for fiscal 2024, driven by ongoing cost management initiatives. The company expects a D&A of $220 million for fiscal 2024. The company anticipates the tax rate in the high 20s for fiscal 2024.
Additionally, the company anticipates comps growth to be stronger in the first half of fiscal 2024 and in the mid-single digits. It estimates comps growth in the low-single digits for the second half of fiscal 2024.
American Eagle expects the business momentum to continue in the fiscal first quarter. The company anticipates year-over-year revenue growth in the mid-single digits, including a one-point positive impact from the retail calendar shift. The revenue guidance includes a gain of $15 million from improved volume during the spring week. Operating income is projected to be $65-$70 million in the fiscal first quarter.
Management expects SG&A expenses to increase in line with sales in the fiscal first quarter. The company expects SG&A to leverage in the fiscal second quarter, driven by its profit improvement initiatives.
Long-Term Strategy
Concurrent with the earnings release, the company revealed its new Powering Profitable Growth plan, which is likely to build upon the strength displayed in fiscal 2023. The plan is designed to deliver annual operating income expansion in the mid-to-high teens, with a 10% operating margin over the next three years. The plan also targets 3-5% annual revenue growth through the end of fiscal 2026. This indicates revenues of $5.7-$6.0 billion and a 10% operating margin by the end of fiscal 2026.
Other Key Picks
Here are some other top-ranked stocks that investors can consider, namely The Gap Inc. (GPS - Free Report) , Deckers Outdoor (DECK - Free Report) and Abercrombie & Fitch (ANF - Free Report) .
Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. GPS currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Gap’s current financial-year earnings suggests growth of 385% from the year-ago reported figure. GPS has a trailing four-quarter earnings surprise of 137.9%, on average.
Deckers Outdoor, a leading designer, producer and brand manager of innovative, niche footwear and accessories, currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for Deckers Outdoor’s current financial-year sales and earnings suggests growth of 15.7% and 38.6% from the year-ago period’s actuals, respectively. DECK has a trailing four-quarter earnings surprise of 32.1%, on average.
Abercrombie, a specialty retailer of premium, high-quality casual apparel for men, women and kids, currently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for Abercrombie’s current financial year’s earnings suggests an increase of 3.2% from the year-ago reported figure. ANF has a trailing four-quarter earnings surprise of 715.6%, on average.