By: David Moin | Link to article

Jennifer Foyle, president and executive creative director of AE and Aerie, tells WWD that a better balance between fashion and essentials and a “healthy” customer file fueled growth last quarter.

American Eagle Outfitters Inc. posted first-quarter top, fueling confidence it’s on the right course with the strategic roadmap outlined earlier this year.

Net income in the first quarter ended May 4 rose to $67.75 million from $18.45 million in the year-ago period.

Operating income rose to $78 million, compared to GAAP [generally accepted accounting principles] operating income of $23 million and adjusted operating income of $44 million last year.

Total net revenue of $1.14 billion rose 6 percent from $1.08 billion in the year-ago period.

“There are two different stories here. We have been repositioning the brands, amplifying American Eagle as well as Aerie. Both brands exceeded expectations,” Jennifer Foyle, president and executive creative director of AE and Aerie, told WWD. She also cited the “health” of the retailer’s customer file. “There’s been nice growth in new customers and in re-engaging customers, particularly on the AE side.”

Secondly, “It’s the magic of product,” Foyle said. “Women’s at AE in particular saw growth. Jeans are coming back, where we will definitely have nice tailwinds into the back half.”

Overall, “We really remixed the business to be more balanced between fashion and basics, and to have the right fashion at the right time. We’re doing our testing and scaling, which we do very well.”

At Aerie, fleece is still a winning category, she added. “We are also introducing new categories and seeing them ramp up, one being sleepwear.”

At Offline, the athletic offshoot brand of Aerie, leggings are the go-to accessory, Foyle said. Offline was introduced as the business came out of the pandemic, and has begun layering new categories into that business.

American Eagle Outfitters’ strategic roadmap, called “Powering Profitable Growth” was unveiled last March. It targets mid-to-high teens annual operating income expansion on 3 to 5 percent annual growth revenue, and about a 10 percent operating margin over the next three years. AEO hopes to add more than $700 million in sales over that stretch, pushing revenues up from $5.26 billion last year to possibly $6 billion. The strategy focuses on what executives describe as “amplifying” American Eagle and its denim business and expanding adjacent categories, fueling Aerie’s expansion, and accelerating activewear growth via Offline. The plan also calls for greater financial disciplines and “leveraging best-in-class” operating capabilities.

“This is about a marathon, not a sprint,” Foyle said. “We are leaning into what we do best — quality at value prices. But we do see opportunities to increase AURs (average unit retail prices) in select categories we are winning on.”

Foyle emphasized that growth last quarter was spurred by “well-rounded assortments” at American Eagle, meaning a better mix of fashion and essentials. She was also bullish on American Eagle’s new store design, noting that about 100 stores will have been renovated by the end of the year. Meanwhile, Aerie is testing a new store design at its Tysons Corner, Va. store.

“Momentum continues into second quarter,” Mike Mathias, executive vice president and chief financial officer, told WWD. “Customers are responding very well to our brands and assortments.”

Asked about industry-wide impressions that consumers are holding back on discretionary spending, impacted by inflation and economic uncertainties, he said, “We’re not seeing any impact from some of that sentiment.”

Mathias did say the company is maintaining a cautious outlook for the second half, based on lapping some positive results from a year ago, the 52-week year versus 53 weeks in 2023, and Fed policy on rates.

Mathias said peak selling for back-to-school happens in August, and that will provide “proof points” for getting a clearer read on how the second half could transpire. Post Labor Day through mid-September, there could be another lift in back-to-school selling, due to what he said was the season “elongating with a little bit of wear now.” Some students tend to purchase apparel after they return to school and see what other students are wearing.

In other results at AEO, store revenues rose 4 percent and digital revenue increased 12 percent.

By division, Aerie’s revenue of $373 million rose 4 percent, with comp sales up 6 percent. American Eagle’s revenue rose 8 percent to $725 million, with comp sales growing 7 percent. AEO also operates the Todd Snyder brand.

“Our strong first quarter results underscore the power of our iconic brand portfolio and demonstrate great progress on our ‘Powering Profitable Growth’ strategy,” Jay Schottenstein, AEO’s executive chairman and chief executive officer, said in a statement Wednesday. “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 optimize our operations and drive efficiencies across the organization, contributed to meaningful profit expansion, which was ahead of expectations.

“As I look forward, I remain confident in our ability to deliver on our plans for 2024 and beyond,” Schottenstein continued. “We have significant runway across our brands and we continue to execute with discipline as we drive our business to deliver sustained, profitable growth and returns to shareholders.”

For fiscal 2024, management continues to expect operating income in the range of $445 to $465 million. This reflects revenue up 2 to 4 percent to last year, including an approximately one point headwind from one less selling week due to the retail calendar shift.

For the second quarter, management expects operating income in the range of $95 to $100 million. This reflects revenue up high-single digits, including about $55 million positive impact from the retail calendar shift.

AEO Inc. Reports First Quarter Fiscal 2024 Results Reflecting Strong Execution on Powering Profitable Growth Strategy

• Record first quarter revenue of $1.1 billion, rising 6% to last year
• Operating profit of $78 million exceeded guidance
• Aerie achieved all-time high first quarter revenue with comps up 6%
• American Eagle sequentially accelerated, with comps increasing 7%

May 29, 2024

PITTSBURGH — (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the first quarter fiscal 2024 ended May 4, 2024.

“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 optimize our operations and drive efficiencies across the organization, contributed to meaningful profit expansion, which was ahead of expectations,” commented Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer.

“As I look forward, I remain confident in our ability to deliver on our plans for 2024 and beyond. We have significant runway across our brands and we continue to execute with discipline as we drive our business to deliver sustained, profitable growth and returns to shareholders,” he continued.

First Quarter 2024 Results compared to First Quarter 2023 Results:

• First quarter 2024 results are presented for the 13 weeks ended May 4, 2024 compared to the 13 weeks ended April 29, 2023. Comparable sales metrics are presented for the 13 weeks ended May 4, 2024 compared to the 13 weeks ended May 6, 2023.
• Total net revenue of $1.1 billion rose 6%.
• Store revenue rose 4%. Digital revenue increased 12%.
• Aerie revenue of $373 million rose 4%, with comp sales up 6%. American Eagle revenue of $725 million increased 8%, with comp sales growing 7%.
• Gross profit of $464 million increased 12%, reflecting a gross margin rate of 40.6%, expanding 240 basis points. Margin expansion was driven by strong inventory management, the company’s shift to a more profitable clearance strategy, lower product and transportation costs and leverage on expenses including rent, delivery, and distribution and warehousing.
• Selling, general and administrative expense of $333 million was up 7%. This was roughly in-line with sales growth and consistent with our guidance.
• Operating income of $78 million, compared to GAAP operating income of $23 million and adjusted operating income of $44 million last year. Compared to last year’s adjusted result, operating income increased 76% and the operating margin of 6.8% expanded 270 basis points.
• Diluted earnings per share of $0.34. Average diluted shares outstanding were 201 million.

Inventory

Total ending inventory increased 9% to $681 million, with units up 10%. Ending inventory includes higher end of season merchandise due to the company’s shift to a more profitable clearance strategy. Inventory levels are healthy and well positioned to fuel growth initiatives.

Shareholder Returns

In the first quarter, the company returned approximately $60 million in cash to shareholders.

This included the repurchase of 1.5 million shares for approximately $35 million. The company continues to have 28.5 million shares remaining for repurchase under the current authorization.

Additionally, the company paid a quarterly cash dividend of $0.125 per share, or approximately $25 million.

Capital Expenditures

Capital expenditures totaled $36 million in the first quarter. For fiscal 2024, management continues to expect capital expenditures to approximate $200 to $250 million.

Outlook

For fiscal 2024, management continues to expect operating income in the range of $445 to $465 million. This reflects revenue up 2 to 4% to last year, including an approximately one point headwind from one less selling week due to the retail calendar shift.

For the second quarter, management expects operating income in the range of $95 to $100 million. This reflects revenue up high-single digits, including an approximately $55 million positive impact from the retail calendar shift.

Webcast and Supplemental Financial Information

Management will host a conference call and real time webcast today at 4:30 pm Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 or go to www.aeo-inc.com to access the webcast and audio replay. Additionally, a financial results presentation is posted on the company’s website.

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About American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc. (NYSE: 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. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico and Hong Kong and ships to approximately 80 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 300 international locations operated by licensees in approximately 30 countries. To learn more about AEO and the company’s commitment to Planet, People and Practices, please visit www.aeo-inc.com.

Non-GAAP Measures

This release includes information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including adjusted operating income for first quarter fiscal 2023. These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies.

Non-GAAP information is provided as a supplement to, not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. Management believes that this non-GAAP information is useful for an alternate presentation of the company’s performance, when reviewed in conjunction with the company’s GAAP consolidated financial statements and provides a higher degree of transparency.

These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company’s business and operations. We encourage investors and others to review our financial information in its entirety, not to rely on any single financial measure and to view these non-GAAP financial measures in conjunction with the related GAAP financial measures.

The tables included in this release reconcile the GAAP financial measures to the non-GAAP financial measures discussed above.

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent management’s expectations or beliefs concerning future events, including, without limitation, second fiscal quarter and annual fiscal 2024 results. Words such as “outlook,” “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “may,” “potential,” and similar expressions may identify forward-looking statements, although not all forward-looking statements contain these identifying words. All

forward-looking statements made by the company are inherently uncertain because they are based on assumptions and expectations concerning future events and are subject to change based on many important factors, some of which may be beyond the company’s control. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024 and in any other filings that we may make with the Securities and Exchange Commission, in some cases have affected, and in the future could affect, the company’s financial performance and could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity.

The use of the “company,” “AEO,” “we,” “us,” and “our” in this release refers to American Eagle Outfitters, Inc.

Each year, AEO honors one associate who has achieved significant accomplishments, personifies our values and who has left an indelible impact on our company and people. We are proud to spotlight the top three finalists for the 2023 AEO ICON.

Meet Dillon, Divisional Merchandise Manager – AE Factory and 2023 AEO ICON nominee.

Dillon’s leadership in the AE Factory strategy significantly boosted financial performance and helped to strengthen the company’s bottom line. His approach to cross-functional teamwork is truly second to none and the strategies that he has helped put into place are set to see benefits for years to come.

In 2023, Dillon took initiative on one of his shared passions with AEO – Pride! He was an instrumental force in elevating our representation of Pride throughout the entire year. Dillon’s innovative ideas and new ways of thinking are an inspiration to his team and all those around him.

In addition to the outstanding accomplishments he has had at AEO, Dillon is an adventure junkie, spontaneous traveler, intellectual reader and Bravo TV aficionado.

Learn more about Dillon and who he is beyond AEO below!

Each year, AEO honors one associate who has achieved significant accomplishments, personifies our values and who has left an indelible impact on our company and people. We are proud to spotlight the top three finalists for the 2023 AEO ICON.

Meet Chrissy, Vice President – Procurement and Transformation and 2023 AEO ICON nominee.

Chrissy has been with AEO for eight years and has shown exceptional leadership and work ethic. She leads the team that supports and negotiates the majority of contracts used at AEO, along with all AEO travel and accounts payable. Some of the larger more interesting projects her team works on include travel and corporate jet negotiations, payment products, marketing and media agency services, supplies and packaging, store construction, and IT services. Chrissy’s passion and hard work led to material savings in 2023, a company-wide mindset shift around expenses and a new foundation for cost savings.

In addition to the amazing accomplishments she has had at AEO, Chrissy is also a proud mom, serious competitor and a devoted Swiftie. Learn more about Chrissy and who she is beyond AEO below!

Each year, AEO honors one associate who has achieved significant accomplishments, personifies our values and who has left an indelible impact on our company and people. We are proud to spotlight the top three finalists for the 2023 AEO ICON.

Meet Kyle, Senior Director – Labor Optimization and Technology and 2023 AEO ICON nominee.

Kyle joined the company more than 20 years ago as a store manager in Tennessee. In 2013, he was able to merge his love of numbers and retail when he joined the Finance team at AEO’s corporate campus in Pittsburgh, PA.

Kyle’s strategic leadership and meticulous approach to his work in wage management, payroll optimization, profitability analysis, and workforce management is a tremendous benefit to the company and his team. He has spearheaded multiple transformative initiatives that enhance associate experience and operational efficiency.

As a team player, Kyle turns every stone to get to the best outcome. In addition to the tremendous accomplishments he has had at AEO, Kyle is also a proud dad, five-star host for patio get-togethers and self-taught cheer competition judge.

Learn more about Kyle and who he is beyond AEO below!

May is Asian American Pacific Islander (AAPI) Heritage Month. At AEO, we are taking this time to reflect on the significance of the AAPI community as we seek to amplify their voices, stories and contributions.

Meet Tracy S., Director – Planning. Tracy spent most of her summers with family in Japan. Keep reading for more on how Tracy’s heritage and identity have shaped her experiences and led to her being an advocate for inclusion.

How long have you been with AEO? What is your current role and can you tell us a little about what you do?

I’ve been with AEO for 18 years (soon to be 19 years in July!). I’m currently the Director of Merchandise Planning for OFFLINE.  

Tell us about your personal background. How and where did you grow up?

I grew up in York, Pennsylvania, but spent most of my summers in Fukushima, Japan with my mother’s family. As a child I remember constantly tugging on my mother’s arm asking her “What did they say?,” because I didn’t understand the language.  It wasn’t until I was in sixth grade that I decided to learn Japanese and could finally stop bothering my mother to be my interpreter!

Tell us about your career journey. What were the most important moments? When you started out, did you think you’d be doing what you’re doing today?

I knew I wanted to be in retail after taking a retail management class in college.  I found consumer behavior fascinating and was very lucky to find a position that paired my love of retail with my love of numbers!  Throughout my career I’ve been fortunate to have mentors and managers who have helped and inspired me.

How has your identity shaped your experiences, both in and out of the workplace?

My mother maintained many Japanese customs and traditions in our house. I was self-conscious about being different and questioned if kids would want to be friends with me. As a child my lunch from home was in a bento box filled with rice, tempura and vegetables.  I know, sounds delicious but all I wanted was the peanut butter and jelly sandwich in the cool lunch box that everyone else had!

Experiences like that have made me an advocate for inclusion. Regardless of background, I never want anyone to feel like they don’t belong. 

Do you have any favorite cultural traditions?
My favorite memories of the time I spent in Japan are with my grandmother.  We traveled throughout the country together to visit friends and family.  She was a retired high school teacher and stressed the importance of education and to never stop learning.