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Here's Why American Eagle (AEO) Stock is a Promising Pick Now
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American Eagle Outfitters, Inc. (AEO - Free Report) stock is well-poised to tap the positive trends in the fashion arena, thanks to its digital endeavors and other robust strategies including the Real Power Real Growth Plan. The company is gaining from brand strength and solid demand for its products that resonate well with customers.
Recently, 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.
Buoyed by such strengths, shares of this apparel and footwear dealer have surged 86.4% compared with the industry’s 56.5% growth in a year. A VGM Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company.
Let’s Delve Deeper
American Eagle is on track with its Real Power Real Growth value-creation plan, which has been aiding the company’s performance for a while now. The plan is driving profitability through real estate and inventory-optimization efforts, omnichannel and customer focus, and investments to improve the supply chain. As part of the aforementioned initiative, American Eagle has been pursuing opportunities to grow the Aerie brand through expansion into newer markets, innovation and a wider customer base. Management also expects to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.
Image Source: Zacks Investment Research
American Eagle’s Aerie brand has also been exhibiting momentum for quite some time now. Sales rose 16% year over year for Aerie in fourth-quarter fiscal 2023 while the brand’s comparable-store sales also improved 13%. Sturdy demand in its core apparel and strength in the OFFLINE brand, both of which posted double-digit growth, aided growth. Also, its activewear extension, OFFLINE by Aerie, bodes well on the back of tops, sports bras, active shorts and fashion items. Management expects to add 100 area OFFLINE stores in the next three years.
The Aerie brand is a key growth engine for American Eagle and remains on track to reach the next brand milestone of $2 billion in sales. Further, the company’s profit-improvement endeavors have been paying off. This, along with leverage on rent, distribution, and warehousing and delivery expenses, aided fourth-quarter fiscal 2023 margins. Higher merchandising margins from lower markdowns coupled with inventory control, and lower freight and product costs are other positives. Driven by these factors, the gross margin expanded 340 basis points (bps) year over year whereas the operating margin rose 200 bps year over year.
Analysts seem quite optimistic about Aerie’s parent company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $5.4 billion and $1.71, respectively. These estimates show corresponding growth of 3.3% and 12.5% year over year. Given all the positives, American Eagle stock seems to deserve a place in your investment portfolio.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure. ANF delivered an earnings surprise of 5.7% in the last reported quarter.
Gap, a leading apparel retailer, currently sports a Zacks Rank of 1. GPS delivered an earnings surprise of 180.9% in the trailing four quarters.
The Zacks Consensus Estimate for Gap’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1. DECK delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.
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Here's Why American Eagle (AEO) Stock is a Promising Pick Now
American Eagle Outfitters, Inc. (AEO - Free Report) stock is well-poised to tap the positive trends in the fashion arena, thanks to its digital endeavors and other robust strategies including the Real Power Real Growth Plan. The company is gaining from brand strength and solid demand for its products that resonate well with customers.
Recently, 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.
Buoyed by such strengths, shares of this apparel and footwear dealer have surged 86.4% compared with the industry’s 56.5% growth in a year. A VGM Score of A further adds strength to this current Zacks Rank #1 (Strong Buy) company.
Let’s Delve Deeper
American Eagle is on track with its Real Power Real Growth value-creation plan, which has been aiding the company’s performance for a while now. The plan is driving profitability through real estate and inventory-optimization efforts, omnichannel and customer focus, and investments to improve the supply chain. As part of the aforementioned initiative, American Eagle has been pursuing opportunities to grow the Aerie brand through expansion into newer markets, innovation and a wider customer base. Management also expects to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.
Image Source: Zacks Investment Research
American Eagle’s Aerie brand has also been exhibiting momentum for quite some time now. Sales rose 16% year over year for Aerie in fourth-quarter fiscal 2023 while the brand’s comparable-store sales also improved 13%. Sturdy demand in its core apparel and strength in the OFFLINE brand, both of which posted double-digit growth, aided growth. Also, its activewear extension, OFFLINE by Aerie, bodes well on the back of tops, sports bras, active shorts and fashion items. Management expects to add 100 area OFFLINE stores in the next three years.
The Aerie brand is a key growth engine for American Eagle and remains on track to reach the next brand milestone of $2 billion in sales. Further, the company’s profit-improvement endeavors have been paying off. This, along with leverage on rent, distribution, and warehousing and delivery expenses, aided fourth-quarter fiscal 2023 margins. Higher merchandising margins from lower markdowns coupled with inventory control, and lower freight and product costs are other positives. Driven by these factors, the gross margin expanded 340 basis points (bps) year over year whereas the operating margin rose 200 bps year over year.
Analysts seem quite optimistic about Aerie’s parent company. The Zacks Consensus Estimate for fiscal 2024 sales and earnings per share (EPS) is currently pegged at $5.4 billion and $1.71, respectively. These estimates show corresponding growth of 3.3% and 12.5% year over year. Given all the positives, American Eagle stock seems to deserve a place in your investment portfolio.
Other Key Picks
We have highlighted three other top-ranked stocks, namely Abercrombie & Fitch (ANF - Free Report) , Gap (GPS - Free Report) and Deckers (DECK - Free Report) .
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 5.6% from the year-ago reported figure. ANF delivered an earnings surprise of 5.7% in the last reported quarter.
Gap, a leading apparel retailer, currently sports a Zacks Rank of 1. GPS delivered an earnings surprise of 180.9% in the trailing four quarters.
The Zacks Consensus Estimate for Gap’s financial-year sales suggests growth of 1.7% from the year-ago reported figure.
Deckers, a footwear and accessories dealer, currently sports a Zacks Rank of 1. DECK delivered an earnings surprise of 24.2% in the trailing four quarters.
The Zacks Consensus Estimate for Deckers’ current financial-year sales suggests growth of 15.8% from the year-ago reported figure.