American Eagle Outfitters, Inc. (AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories, and personal care products at affordable prices under its American Eagle® and Aerie® brands. The company has a strong track record of brand building and operational excellence, positioning it well to capitalize on the growing demand for casual and lifestyle apparel.
Financials
In the latest fiscal year, AEO reported annual revenue of $5.26 billion and net income of $170.04 million. The company generated robust annual operating cash flow of $580.71 million and free cash flow of $406.27 million, underscoring its financial strength and ability to invest in growth initiatives.
During the first quarter of fiscal 2024, AEO continued to execute on its strategic priorities, delivering impressive results. Total revenue increased 6% year-over-year to $1.14 billion, driven by a 7% increase in comparable sales. The American Eagle brand saw an 8% revenue increase, while Aerie revenue grew 4%. Gross profit expanded 12% to $464.24 million, with gross margin improving by 240 basis points to 40.6%. Operating income surged 241% to $77.84 million, representing a 470-basis-point increase in operating margin to 6.8%.
Business Overview
The company's focus on amplifying its iconic brands, optimizing operations, and executing with financial discipline is paying off. American Eagle's women's business saw strength in tops, dresses, skirts, and jeans, while the men's category experienced growth in pants, knits, sweaters, and outerwear. Aerie continued its momentum, with the core soft dressing and activewear businesses delivering double-digit comparable sales growth, excluding the impact of the challenging swim category.
AEO's digital channels also performed well, with a 12% increase in digital revenue. The company's omni-channel capabilities and investments in mobile technology, digital marketing, and the customer experience are driving engagement and sales across both physical and online channels.
Outlook
Looking ahead, the company expects full-year revenue growth in the range of 2% to 4%, including a 1-percentage-point negative impact from one less selling week. AEO is guiding for operating income of $445 million to $465 million, reflecting its confidence in the strategic initiatives underway.
In the second quarter, the company anticipates operating income of $95 million to $100 million, with revenue growth in the high single digits. This includes a $55 million positive impact from the shift in the retail calendar, as the company captures an additional week of back-to-school sales.
Liquidity
AEO's balance sheet remains strong, with approximately $300 million in cash and over $900 million in total liquidity, including its revolving credit facility. The company continues to return capital to shareholders, having paid $24.6 million in dividends and repurchased $34.9 million in shares during the first quarter.
Geographic and Segment Breakdown
Geographically, the company operates in the United States, Canada, Mexico, and Hong Kong, with international licensed and franchise stores in approximately 30 countries. In the first quarter, the United States accounted for 83.3% of total revenue, while international markets contributed the remaining 16.7%.
From a segment perspective, the American Eagle brand generated 63.4% of total revenue, while Aerie contributed 32.6%. The company's other brands, including Todd Snyder and Unsubscribed, made up the remaining 4.8% of revenue.
Conclusion
AEO's strategic initiatives are resonating with consumers, as evidenced by the strong performance across its brands and channels. The company's focus on product innovation, customer engagement, and operational excellence positions it well to navigate the evolving retail landscape and drive consistent, profitable growth in the years ahead.