American Eagle Outfitters Q1 revenue climbs 6%, projects strong FY24

Aerie, one of the company’s flagship brands, saw its revenue climb by 4 per cent to $373 million, with comparable sales up 6 per cent. Meanwhile, American Eagle's revenue increased by 8 per cent to $725 million, with comparable sales growing by 7 per cent. Gross profit for the quarter increased by 12 per cent to $464 million, reflecting a gross margin rate of 40.6 per cent, a 240-basis point expansion. This improvement was driven by effective inventory management, a shift to a more profitable clearance strategy, and reduced product and transportation costs, the company said in a media release.

Operating income for the quarter reached $78 million, a significant rise from last year's GAAP operating income of $23 million and adjusted operating income of $44 million, representing a 76 per cent increase. The operating margin expanded by 270 basis points to 6.8 per cent. Selling, general, and administrative expenses increased by 7 per cent to $333 million, aligning with the sales growth and consistent with the company's guidance. Diluted earnings per share stood at $0.34, with an average of 201 million diluted shares outstanding.

In terms of inventory, total ending inventory increased by 9 per cent to $681 million, with units up 10 per cent, reflecting higher end-of-season merchandise due to the profitable clearance strategy. The company returned approximately $60 million in cash to shareholders during the first quarter, which included the repurchase of 1.5 million shares for about $35 million. Additionally, a quarterly cash dividend of $0.125 per share, amounting to approximately $25 million, was paid out. Capital expenditures for the first quarter totalled $36 million.

For FY24, American Eagle Outfitters expects capital expenditures to be between $200 to $250 million. Looking ahead, the company projects operating income for FY24 to be in the range of $445 to $465 million, with revenue expected to rise by 2 to 4 per cent despite a one-week headwind due to the retail calendar shift. For the second quarter, operating income is anticipated to be between $95 to $100 million, with revenue projected to grow in the high-single digits, benefitting from a $55 million positive impact from the retail calendar shift.

“Our strong first quarter results underscore the power of our iconic brand portfolio and demonstrate great progress on our Powering Profitable Growth strategy. We achieved record revenue, amplifying American Eagle’s and Aerie’s leading market positions and opportunity in casual apparel. We continued to offer exciting merchandise collections and customer activations, providing compelling in-store and digital shopping experiences. This, combined with actions to optimise our operations and drive efficiencies across the organisation, contributed to meaningful profit expansion, which was ahead of expectations,” commented Jay Schottenstein, AEO’s executive chairman of the board and chief executive officer.

Fibre2Fashion News Desk (KD)