American Eagle tops estimates on robust apparel demand, fewer discounts

By Juveria Tabassum

(Reuters) -American Eagle Outfitters on Thursday topped Wall Street estimates for the fourth quarter on robust demand for its full-price denims and active wear apparel during the crucial holiday shopping season in the United States.

The company's shares rose as much as 12.8%, after the owner of the Aerie brand also forecast revenue growth for full-year 2024 largely in line with analysts' expectations.

American Eagle also said it is aiming for a growth of mid-to-high teens in annual operating income over the next three years.

The long-term target banks on American Eagle's strategy to expand the exposure of its brands to higher-margin categories such as shirts and tops as well as athletic and casual wear, and innovation in designs and fabrics for both men and women.

"As casual dressing continues to evolve, men are increasingly adding active wear to their look, both in and out of the gym," said Jennifer Foyle, executive director of the American Eagle and Aerie brands.

Rachel Wolff, an analyst at Insider Intelligence, said American Eagle's focus towards tailoring its product assortment has helped it cut down on unnecessary markdowns and sets it apart from other retailers predicting softer spending ahead.

The company said it expects to add 100 stores for its active wear brand Offline, over the next three years, along with the remodeling and upgrading about 300 American Eagle brand stores.

Its revenue for the quarter ended Feb. 3 grew 12% to $1.68 billion, beating the LSEG estimates of $1.66 billion.

The company's gross margin rate grew 340 basis points to 37.3% in the reported quarter, on easing input and transportation costs as well fewer discounts.

Excluding items, American Eagle earned 61 cents per share, ahead of estimates of 50 cents.

It recorded a $131 million impairment and restructuring charge in the fourth quarter as it looked to streamline its distribution network.

(Reporting by Juveria Tabassum; Editing by Shilpi Majumdar and Shailesh Kuber)