Mixed bag for fashion-apparel giants from Americas in Q3 2023

STRONG: GROWTH IN BOTH SALES AND PROFITS

American Eagle Outfitters (NYSE: AEO)

American Eagle Outfitters Inc is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its brands—American Eagle and Aerie. The Pittsburgh-headquartered company announced its third quarter financial results on November 21, in which it reported strong operating profit and updated annual outlook that reflected an improved demand and profit improvement initiatives.

The reported quarter achieved a record net revenue of $1.3 billion, rising 5 per cent from last year. Revenue from stores was up by 3 per cent, while digital revenue shot up by 10 per cent. Growth was across all channels and brands, with Aerie posting an all-time high Q3 revenue of $393 million, an increase of 12 per cent, and American Eagle revenue reaching $857 million, up 2 per cent. This reflects continued sequential improvement in trends.

The company earned $544 million in gross profit, an increase of 13 per cent, reflecting a gross margin of 41.8 per cent—up 310 basis points from last year. The growth in the margin was driven by strong demand, lower product and freight costs, and continued benefits from profit improvement work that included lower markdowns and leverage on rent, distribution, warehousing, and delivery. The operating profit for the quarter stood at $125 million, a 9.6 per cent margin, and was the second highest since 2012. This yielded a diluted EPS of $0.49, posting a rise of 17 per cent. At the end of the quarter, total inventory declined by 4 per cent to $769 million, with units going down by 3 per cent.

In its full year 2023 outlook, the management expects revenue growth in mid-single digits over 2022, compared to earlier guidance of low single digits. The operating income is expected to be in the range of $340 to $350 million against prior estimate of $325 to $350 million.

Arezzo (BVMF: ARZZ3)

Arezzo & Co, a Brazil-based footwear and accessories conglomerate, posted solid results for its Q3 2023 performance. The Brazilian fashion behemoth reached R$1.6 billion in gross revenue, registering a 12.7 per cent growth over the same quarter of last year. The revenue had a 29 per cent share coming from Arezzo, 26 per cent from AR&CO, 16 per cent from Schutz, 8 per cent from Anacapri, and the remaining 21 per cent from other brands. Total contribution from web sales was R$331 million, up 18.8 per cent. The company’s gross profit reached R$680.726 million, up 13.2 per cent from last year’s R$601.302 million, resulting in a one percentage point increase in margin that changed from 52.8 per cent to 53.8 per cent on a comparable basis. The net income grew 4.2 per cent to R$107.176 million, reflecting a margin of 8.5 per cent.

The YTD (nine-month) result included aggregate revenue of R$4.3 billion, up 18.7 per cent from R$3.6 billion in the same period of the prior year. Gross profit increased from R$1.58 billion, representing 54 per cent of sales last year, to R$1.84 billion, or 53.7 per cent of sales in 2023. Additionally, net income increased by 3.7 per cent, from R$283.742 million to R$294.155 million.

Ross Stores Inc (NASDAQ: ROST)

Ross Stores, Inc is an S&P 500, Fortune 500, and Nasdaq 100 company headquartered in Dublin, California.

The company announced its third-quarter results on November 16, in which its net income rose to $447 million compared to $342 million in Q3 2022. This increase in net income resulted from $4.9 billion in sales during the reported quarter, which was 5 per cent more than the previous year's $4.6 billion. For the cumulative nine months of 2023, the company produced an EPS of $3.74 on net earnings of $1.3 billion, versus $3.08 per share on a net income of $1.1 billion for the same nine-month period in 2022. This increase was due to $14.4 billion in sales during the period, registering a 4 per cent growth in comparable sales over 2022.

Projecting results for its fourth quarter ending January 27, 2024, the company expects same-store sales to grow by 1 to 2 per cent. It also projected the EPS for the 14 weeks ending February 3, 2024, to be in the range of $1.56 to $1.62, compared to $1.31 in 2022. Based on the company's YTD results and the Q4 2023 forecast, the EPS for the 53 weeks ending February 3, 2024, are expected to be in the range of $5.30 to $5.36, up from $4.38 last year.

WEAK: NO GROWTH IN SALES AND PROFITS

Macy’s Inc (NYSE: M)

Macy's Inc announced its Q3 results on the same day as Ross Stores. The NYSE-listed and New York-based off-price to luxury fashion company reported net sales of $5 billion, which was a 7 per cent decrease overall, affecting both in-store and digital sales. Comparable sales were also down 7 per cent on an owned basis and 6.7 per cent on an owned-plus-licensed basis. However, the gross margin rate for the quarter was 40.3 per cent, an improvement from last year's 38.7 per cent, despite gross profit reducing from $2,026 million to $1,958 million. The margin rate improvement was attributed to lower permanent markdowns within the Macy's brand, improved freight expense, and partially offset by planned changes in Macy's category mix. Net income reduced as well, from $108 million to $43 million.

The company updated its earlier guidance from August 22: the range for net sales was changed from $22.8-$23.2 billion to $22.9-$23.2 billion, resulting in a revised projection of negative growth of 6-7 per cent, slightly improved from the earlier forecast of negative 6-7.5 per cent. The adjusted diluted EPS was revised to $2.88-$3.13 from $2.70-$3.20.

Macy's owns iconic nameplates (brands) of Macy's, Bloomingdale's, and Bluemercury.

Dillard’s Inc (NYSE: DDS)

Dillard's, Inc ranks among the largest fashion apparel, cosmetics, and home furnishings retailers in the US.

In its November 9 release, Arkansas-based Dillard’s Inc reported a decline in total net sales from $1.544 billion in Q3 2022 to $1.476 billion in 2023, inclusive of company’s construction business (CDI). Excluding CDI, retail sales declined 6 per cent from $1.499 billion in last year to $1.409 billion this year.

For the 13 weeks ended October 28, 2023, the retail gross margin (excluding CDI) was 45.3 per cent of sales compared to 45.7 per cent of sales for the prior year's third quarter. There was a moderate increase in the home and furniture and ladies’ apparel categories; a moderate decrease in ladies’ accessories and lingerie, as well as in men’s apparel and accessories, juniors’ and children's apparel, and shoes; and remaining flat in cosmetics. The comparative inventory level decreased by 1 per cent.

Over the first three quarters of 2023, retail sales decreased by 5 per cent (store sales down by 4 per cent), while net income reduced from $602.5 million to $488.3 million when compared to the nine-month period of 2022.

The company is ending its fiscal 2023 on February 3, 2024.

Fibre2Fashion News Desk (KD)