American Eagle Outfitters Inc (AEO) Reports Record Q3 Revenue and Operating Profit
Record third-quarter revenue of $1.3 billion, a 5% increase over the previous year.
Operating profit reaches $125 million, marking the second highest since 2012.
Aerie brand achieves all-time high third-quarter revenue and operating margin with a 12% rise in comparable sales.
Inventory discipline maintained with a 4% decline in total ending inventory.
On November 21, 2023, American Eagle Outfitters Inc (NYSE:AEO) released its 8-K filing, announcing a record third-quarter revenue of $1.3 billion, which is a 5% increase compared to the same period last year. This growth was seen across both brands and channels, with the Aerie brand posting a particularly strong performance.
Financial Highlights and Performance
American Eagle Outfitters Inc (NYSE:AEO) reported a robust operating profit of $125 million, which is up from the previous year and represents the second highest since 2012. The company's gross profit saw a significant increase of approximately 13%, reaching $544 million, with a gross margin rate improvement of 310 basis points to 41.8%. This margin expansion was attributed to strong demand, lower product and freight costs, and the benefits from profit improvement initiatives, including reduced markdowns and leverage on rent, distribution, and warehousing, and delivery expenses.
Income Statement and Balance Sheet Review
The consolidated balance sheets show a healthy current ratio of 1.63, with cash and cash equivalents at $240.9 million. Merchandise inventory was carefully managed, resulting in a 4% decrease to $769.3 million. Total assets stood at $3.52 billion, with stockholders' equity accounting for $1.73 billion of that total.
The consolidated statements of operations reveal that the total net revenue for the 13 weeks ended October 28, 2023, was $1.3 billion, with a net income of $96.7 million, or $0.49 per diluted share, representing a 17% increase in earnings per share. The American Eagle brand contributed $857.3 million to the net revenue, while Aerie added $393 million, both showing increases over the previous year.
Inventory and Capital Expenditures
Inventory levels were carefully managed, with a 4% decline in total ending inventory to $769 million, reflecting the company's commitment to inventory discipline. Capital expenditures for the third quarter totaled $43 million, with a year-to-date total of $135 million. Management anticipates capital expenditures for Fiscal 2023 to be between $150 to $175 million.
Outlook and Management Commentary
Management has updated its annual outlook, expecting revenue to be up mid-single digits compared to the previous year, with operating income anticipated to be in the range of $340 to $350 million. This reflects strengthened demand and continued profit improvement. For the fourth quarter, revenue is expected to be up high-single digits, with operating income projected between $105 to $115 million.
I am pleased with our third quarter results which demonstrated the strength of our brands and reflected continued progress on our growth and profit improvement initiatives. Our strategic priorities, underpinned by our customer-first focus and commitment to operational excellence are propelling us forward, commented Jay Schottenstein, AEOs Executive Chairman of the Board of Directors and Chief Executive Officer.
For more detailed information, investors and analysts are encouraged to review the full earnings release and financial statements available on the American Eagle Outfitters Inc (NYSE:AEO) website and to join the conference call and webcast hosted by management.
Conclusion
American Eagle Outfitters Inc (NYSE:AEO) has demonstrated a strong performance in the third quarter of 2023, with record revenues and a solid operating profit. The company's focus on strategic priorities and profit improvement initiatives has yielded positive results, and the updated outlook suggests continued confidence in the brand's growth trajectory. Investors and stakeholders can look forward to the potential for consistent growth and improved profitability in the coming year.
Explore the complete 8-K earnings release (here) from American Eagle Outfitters Inc for further details.
This article first appeared on GuruFocus.
