EXCLUSIVE: American Eagle Outfitters Bucks Trend; Omicron. Despite the updated guidance

American Eagle Outfitters is on the roll.

While competitors around the fashion world began to express concern over Omicron’s effects on sales and profits, American Eagle Outfitters – Including American Eagle, Erie, offline by eri, unsubscribe, AE77 and the Todd Snyder brand — did a one-on-one on the retail industry on Tuesday morning, ahead of its presentation at the ICR 2022 virtual retail conference, raising its two-year operating income and revenue targets.

American Eagle Outfitters

Looks from the American Eagle brand.
Courtesy Photo AEO

“We’re Going to Hit Record Revenue” [this quarter]American Eagle Outfitters chief financial officer Michael Mathias told WWD in an exclusive interview. “Every quarter this year will be a record-revenue quarter, including the fourth quarter. We’ve had record earnings quarter by quarter, every quarter through the full year through the second and third quarters. Q4 wouldn’t have been quite a record, but it would have been the highest since 2007, if not for additional freight costs. Otherwise, we’re pleased with the performance, demand level and bottom line of both brands.

Mathias is referring to an additional $80 million in air and sea freight costs during the fourth quarter as – Which the company predicted during its November conference call – Thanks to supply chain disruptions, such as factory closures in Vietnam.

“We’ve spent a lot more than we would typically spend on that part of the business, the transportation cost to get the product here,” Mathias said. “But in both the brands we have seen an increase in customers in the back half of the year. We’re still 25. tending towards [percent] Erie has a 30 percent growth rate and it shows no signs of slowing down. And [the growth drivers] are true [our] Strength and continued new customer growth across categories is driving growth.

“Not to say that there weren’t some potential disruptions from the supply chain impact. We spent an additional $80 million [on delivery],” she continued. “But I think we have rolled out pretty well based on the demand numbers we are talking about. We were focused and said we were going to spend on freight and transportation costs to get our product here, to minimize the supply chain disruption of the business. We didn’t want customers to feel this during the holiday.”

Looks like the formula is paying off. American Eagle Outfitters, which said a year ago that it will reach $550 million in operating income by 2023, And then later said it would reach $600 million by the end of the 2021 fiscal year, now forecasting it will reach $800 million in operating income by 2.023, while generating $5.8 billion in annual revenue within the same time frame, up from the previous target of $5.5 billion by 2023. Meanwhile, Erie’s annual revenue is also expected to exceed $2 billion by 2023, while the company estimates that American Eagle’s annual revenue will increase slightly from 2019 levels to approximately $3.6 billion by 2023.

Aerie.  offline by

The activewear brand Offline by Aerie is part of the American Eagle Outfitters family.
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For the fourth quarter of 2021, the retailer is expecting revenue growth in the mid-to-high teens category compared with results for the fourth quarter of 2020, and in the mid-teens, compared to the fourth quarter of 2019, with $$ in revenue. Helps to cross 5 billion. The year.

“I am extremely proud of the team’s outstanding performance over the past year, which has driven real structural reforms within our company,” said Jay Schottenstein, Executive Chairman and Chief Executive Officer of the firm. “Inventory and real-estate optimization combined with strong demand from product improvements has reignited profitability in the American Eagle brand. Aerie consolidated another year of industry-leading growth and achieved substantial turnaround in profitability as its powerful brand platform continues to expand. Operational excellence delivered solid results amidst external disruptions. We completed a milestone year for our supply chain, anchored by two major acquisitions, Which achieved cost efficiency, locked in key strategic advantages and set a new stage for future growth. As I look ahead, I see tremendous growth potential and opportunities in the organization. We are excited to see our successes continue as we strive to reach greater heights and create lasting value for our shareholders. ,

eri aeo

Leggings remain a major growth driver in Aerie.
credit photo

Still, there are adverse conditions throughout the retail industry, such as the recent surge in the Omicron version. Mathias acknowledged that American Eagle Outfitters also faced some challenges, such as staff shortages in distribution centers and stores, but added, “There is no significant impact on our business right now. January is the shortest month of the quarter.” So the overall impact of the quarter, we don’t see that significant with Omicron. I think everybody expects the peak [of Omicron] Here in January. And we have no reason to believe that won’t happen. We believe and expect that we will not see a significant impact in the first quarter in the spring. And we’ll see how it plays out. Nothing we can control, but we will keep track of what we see in our own business.

“We see no reason to believe that there will be a serious disruption in our store hours or that the spike will result in significant store closures,” he said. “We’re navigating this week by week.”

In fact, Mathias said the retailer will continue to open more Aerie and offline locations in the near term, while optimizing the American Eagle real estate fleet. An ideal store count, he said, would be between 600 and 700 American Eagle stores and a combined 500 Aerie stores in North America, adding to the leases for a few AE locations, many of which were previously slated for closure, Thanks are being negotiated again for a return to store in 2021.

“Flexibility is important to us right now and we’re seeing great results from our stores, so there’s no reason for us to be more aggressive than ever,” Mathias said.

“As we move into fiscal year 2022, these” [logistics] The businesses that we are acquiring we believe can be somewhat significantly additive to both revenue and earnings for the company,” he said. “This goal [that the company is setting today] Don’t replenish it for 2023 just yet. In terms of the earnings gains we’ve seen, how are we managing inventory and delivery costs and supply chain costs, this node network that we’ve partnered with Quiet [Logistics] Over the past year and a half, we’ve seen gains in our expenses while controlling for inventory costs, our markdown costs, merchandise margin gains from this network as well as delivery and supply chain costs. We continue to leverage and seek continuous improvement going forward. The initial reason for the acquisition was to offset those benefits for our business. But then we also see upside and opportunity from these logistics businesses just in terms of revenue and earnings that will be additive to our consolidated results. ,

Shares of American Eagle Outfitters, which closed down 1.84 percent on Monday at $23.51, are up about 2.6 percent year-over-year.

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