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American Eagle (AEO) Lifts '23 Financial Goals on Growth Plans

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American Eagle Outfitters, Inc. AEO has been gaining from significant progress in its Real Power Real Growth value creation plan, which aims at real estate and inventory optimization efforts, omni-channel and customer focus via innovation and expansion, and supply-chain investments.

Driven by the progress on the plan and robust holiday season sales, the company expects to achieve an operating income of $600 million in fiscal 2021. This will help it surpass its fiscal 2023 operating income and margin goals two years ahead of schedule.

As a result, management raised the 2023 financial targets. AEO now expects revenues of $5.8 billion, up from earlier mentioned $5.5 billion. Operating income is estimated to be $800 million, with the operating margin expanding to 13.5% by 2023. Previously, operating income and operating margin were anticipated to be $550 million and 10%, respectively. The revised view doesn’t include asset impairment and restructuring charges.

The company expects revenues for the Aerie brand to reach $2.2 billion by 2023, with more than a 20% compound annual growth rate compared with fiscal 2019. The American Eagle brand is also envisioned to grow slightly from fiscal 2019, with $3.6 billion in revenues.

The company also updated the fourth-quarter fiscal 2021 view, which suggests gains from solid demand and pricing actions. It anticipates fourth-quarter revenue growth in a mid-to-high teens range on a year-over-year basis and mid-teens growth on a two-year basis. The operating income is likely to be $90-$100 million, inclusive of freight expenses of $80 million stemming from supply-chain disruptions.

As part of the Real Power Real Growth plan, the company will continue to pursue opportunities to grow the Aerie brand through expansion into newer markets, innovation and a growing customer base. The company’s efforts under the plan have aided the recovery of the American Eagle brand. Going forward, the company expects to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.

The company is also focused on enhancing the supply chain under the aforementioned plan. Its recent acquisitions of Quiet Logistics and AirTerra to offer affordable same-day and next-day delivery services bode well. The buyouts will not only transform the supply chain but also help expand AEO’s customer base as well as drive growth, particularly in its online channel.

Zacks Investment Research
Zacks Investment Research

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Shares of the Zacks Rank #3 (Hold) company have gained 7.4% in a year against the industry’s decline of 21.7%.

Stocks to Consider

We have highlighted three better-ranked companies in the Retail - Wholesale sector, namely Zumiez ZUMZ, Capri Holdings CPRI and Costco Wholesale Corporation COST.

Zumiez, a global lifestyle retailer, currently flaunts a Zacks Rank #1 (Strong Buy). Shares of ZUMZ have gained 12.5% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Zumiez’s fiscal 2022 sales suggests growth of 1.1% from the year-ago reported figure. ZUMZ has a trailing four-quarter earnings surprise of 2,560.4%, on average.

Capri Holdings, which operates membership warehouses, presently carries a Zacks Rank #2 (Buy). The company has a trailing four-quarter earnings surprise of 1024.9%, on average. Shares of CPRI have rallied 35.8% in the past year.

The Zacks Consensus Estimate for Capri Holdings’ sales and EPS for the current financial year suggests respective growth of 33.2% and 181.1% from the year-ago period’s reported figures. CPRI has an expected EPS growth rate of 32.2% for three to five years.

Costco Wholesale presently has a Zacks Rank #2. The company has a trailing four-quarter earnings surprise of 8.3%, on average. Shares of COST have rallied 48.4% in the past year.

The Zacks Consensus Estimate for Costco Wholesale’s sales and EPS for the current financial year suggests respective growth of 10.8% and 13.9% from the year-ago period’s reported figures. COST has an expected EPS growth rate of 8.8% for three to five years.


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Zumiez Inc. (ZUMZ) : Free Stock Analysis Report

American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report

Costco Wholesale Corporation (COST) : Free Stock Analysis Report

Capri Holdings Limited (CPRI) : Free Stock Analysis Report

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Zacks Investment Research