American Eagle (AEO) Exhibits Solid Prospects Amid Risks
American Eagle Outfitters, Inc. AEO is well-poised to benefit from brand strength, innovation efforts, solid omni-channel capabilities and an emphasis on inventory discipline. The company expects to gain from favorable demand for its leading brands and expansionary efforts into new markets.
The company remains focused on its Real Power Real Growth value creation plan, which has been boosting its performance. The plan is driving profitability through real estate and inventory optimization efforts, omni-channel and customer focus and investments to improve the supply chain. The company’s efforts under the plan have enabled it to recover its American Eagle brand. Moving ahead, it is likely to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.
In the first quarter of fiscal 2023, AEO’s Aerie brand witnessed substantial improvement and maintained strength in its categories. Sales rose 12% to $359 million for Aerie in the quarter. In 2022, the brand reached $1.5 billion in revenues, driven by store expansion. Strength across seasonal tops and new bottom silhouettes acted as major growth drivers for the brand. The Aerie brand remains on track to reach the milestone of $2 billion in sales, of which $1.5 billion has already been generated.
American Eagle is also committed to rewarding shareholders through dividend payouts. For instance, in the first quarter of fiscal 2023, the company paid out dividends of $19.6 million to its shareholders.
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The Zacks Rank #3 (Hold) company’s shares have gained 2.2% in the past three months compared with the industry’s 3.9% growth.
However, the company has been reeling under the ongoing uncertain macro landscape. It provided a cautious guidance for fiscal 2023.
For fiscal 2023, revenues are expected to be flat to down in the low-single digits. The operating income is anticipated to be $250-$270 million, indicating a decline from $269 million in fiscal 2022. For the fiscal second quarter, it expects revenues to decline in the low-single digits year-over-year.
Rising costs and expenses, if not controlled, can also weigh on its margins and profitability in the quarters ahead. In the fiscal first quarter, its selling, general and administrative expenses (“SG&A”) increased 4.5% on a year-over-year basis. For the fiscal second quarter, the company expects SG&A to increase in the low to mid-single digits.
Key Picks
Some better-ranked stocks are Urban Outfitters, Inc. URBN, Abercrombie & Fitch Co. ANF and Stitch Fix, Inc. SFIX. Urban Outfitters and Abercrombie & Fitch currently sport a Zacks Rank #1 (Strong Buy), and Stitch Fix carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. The Zacks Consensus Estimate for Urban Outfitters’ current financial-year sales and earnings per share suggests growth of 5.1% and 57.1%, respectively, from the corresponding year-ago reported figures. URBN has a trailing four-quarter earnings surprise of 12.2%, on average.
Abercrombie & Fitch operates as a specialty retailer of premium, high-quality casual apparel for men, women and kids. The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 3.4%. Its earnings per share are expected to rise 732% from the corresponding year-ago reported figures. ANF has a trailing four-quarter earnings surprise of 480.6%, on average.
Stitch Fix provides a range of apparel, shoes and accessories. The Zacks Consensus Estimate for SFIX’s current financial-year earnings per share suggests growth of 9% from the corresponding year-ago reported figure. The company has a trailing four-quarter earnings surprise of 7.7%, on average.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
Urban Outfitters, Inc. (URBN) : Free Stock Analysis Report
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