By Jade Yan | Link to Article

The brand is seeking to appeal to Gen Z with a new Roblox partnership and philanthropy involving influencers.

American Eagle is the latest brand to dip its toes in the metaverse, thanks to a new deal with Roblox aimed at making gains with Gen Z.

To read the full article, click here.

By Kellie Ell | Link to article

But the retailer offers a conservative forward-looking guidance based on macro uncertainties.

American Eagle Outfitters record run continues.

The retailer — parent company to American Eagle, Aerie, Offline by Aerie, Todd Snyder, AE77 and Unsubscribed brands — revealed quarterly and full-year earnings Wednesday after the market closed, improving on top and bottom lines and delivering on its promise to surpass the company’s fiscal 2023 operating-income targets two years ahead of schedule.

The firm’s success was driven by demand across the assortment (everything from activewear to loungewear to dresses), higher full-priced sell-throughs and lower promotions, rental savings and delivery efficiencies thanks to the acquisition of two different last-mile logistics firms last year, according to Michael Mathias, chief financial officer at American Eagle Outfitters.

“It’s a combination of revenue recovering in AE, revenue growth in Aerie and those gross-margin efficiencies that we’ve now built into our business,” Mathias told WWD in an exclusive interview. “We’ve reduced inventory significantly, reduced choice in sku counts by 30 to 40 percent, especially in the AE brand. We’ve reduced inventory in stores that used to be trapped there, which would lead to markdowns by 40 percent. That’s with the Quiet acquisition and the use of those additional facilities and nodes allowing us to replenish stores within a one- to two-day period, versus up to a week. And then those direct-to-consumer orders, not only from our own [distribution centers], but our nodes, really reduced delivery costs significantly, just by putting inventory closer to the end customer and reducing the number of packages, or what we’d call split shipments that would have to be sent to customers. Those are structural improvements we are intent on hanging onto.”

Those structural changes help explain the retailer’s recent quarterly and full-year earnings results, which were strong, despite continued uncertainty amid the pandemic, supply-chain challenges and inflationary pressures. 

For the three-month period ending Jan. 29, American Eagle Outfitters’ total company revenues rose $216 million, or 17 percent, to $1.5 billion, up from $1.29 billion during last year’s fourth quarter. Revenues also increased in the retailer’s two biggest brands. At American Eagle, total sales grew 11 percent to $1.04 billion, up from $943 million a year ago. Revenues at Aerie surged 27 percent to $428 million, up from $337 million a year ago. That’s on top of last year’s 25 percent growth. Consolidated store revenue was also up, 32 percent for the quarter. 

The company ended the quarter with $50.4 million in net income, up from $3.5 million a year earlier.  

Meanwhile, total digital revenue declined 3 percent for the quarter, year-over-year. But Mathias pointed out that the decline is compared with 2020’s elevated digital numbers, when consumers were stuck at home on lockdown and stores were closed.  

“Our digital business, versus 2019, is up significantly,” he said — 31 percent, when compared with 2019’s fourth quarter, or about 35 percent in the current quarter. 

At the same time, consumers are returning to stores. While in-store shopping patterns are not quite back to pre-pandemic levels — thanks to lingering local lockdowns and other restrictions in certain areas — Mathias said, “It’s definitely a bit of a channel shift from digital back to stores. That happened during holiday and it’s happening again in the beginning of the first quarter here. It looks like stores are definitely still important to our customers.”

He added that the company — which has more than 1,100 stores across the entire portfolio, including stores in Mexico and Hong Kong — will “continue to optimize the fleet over time with cash-flow generation and income being a driver of the timing of when we’ll continue to reduce the store footprint for AE.”

The company has lease-term flexibility over many of its stores, with about 400 locations up for some type of lease action — either an expiration or kick-out — in the near-term, Mathias added. The plan is to reduce the number of AE stores from around 800 to between 600 and 700 over time, while increasing the Aerie and Offline store fleet by about 60 units a year, until it’s close to 500 or 600 stores. (There are currently about 441 Aerie and Offline locations.) 

“It’s a combination of closing AE stores [and] getting rent renegotiations,” he said. “We’re getting favorable deals from our new Aerie and Offline locations. And we’re going to take a data-centric approach, where we’re actually measuring the customer and revenue transfer that is happening as we close these locations. Just to make sure we’re comfortable with the sales transfer when we close the store to other stores or our digital channel, before we make that decision. We’re measuring that pretty much every quarter.”

For the full 2021 fiscal year, the company’s total revenues grew by 33 percent, or $1.3 billion, to $5 billion, up from $3.8 billion a year ago. By brand, Aerie continued to be the standout, with full-year revenues increasing 39 percent, compared with the previous year, to $1.4 billion — or up 72 percent compared with 2019’s pre-pandemic times. Sales at American Eagle rose 30 percent for the year to $3.6 billion, compared with full-year declines of 21 percent in 2020. Compared with 2019 levels, AE total revenues were up 2 percent. 

American Eagle Outfitters logged nearly $420 million in profits for the year as a result, compared with losses of $209 million a year earlier. 

“2021 was a milestone year for AEO,” said Jay Schottenstein, AEO’s executive chairman of the board and chief executive officer. “We entered 2022 a stronger company, supported by our powerful brands, a proven strategy, improved discipline and strategically advantaged operations. While the macro environment remains challenging and we are taking this into account in our plans for the year, we expect our results to still reflect meaningful progress versus prior years, setting a new baseline for profitability. As I look further out, I couldn’t be more excited as we build on our success and deliver returns to shareholders.”

Still, the company is not immune to macro challenges, which helps explain AEO’s conservative forward-looking guidance. For the full 2022 fiscal year, the retailer expects operating profits to be in the range of $550 million to $600 million, compared with adjusted operating profits of $603 million in 2021. 

“Due largely to stimulus in the first half of 2021, which contributed to an extraordinary spring season, combined with continued freight pressures, we are forecasting an earnings decline in the first half, followed by a recovery in the second half as we lap elevated air freight due to factory closures and inventory flow challenges last year,” the company said in a statement. 

During the most recent quarter, headwinds included an additional $80 million in freight costs ($90 million for the full year). The firm said approximately $60 million of that was air freight specific to Vietnam factory closings in the most recent quarter, or $70 million for the year. Approximately half of the freight costs were related to Aerie and the balance to the American Eagle brand.

“Without that, we would have been a $170 million [operating-income] number, which is really significant to the last few years,” Mathias said, adding that rising freight costs are included in the guidance. 

“We’re pleased so far with the trend in spring as we head into March, but I think everyone is waiting — including us — to see the mid-March period that we’re up against [compared with] last year. That was when the $1,400 [stimulus] checks started rolling out,” he continued. “We definitely saw a significant increase in our business back at the end of March and into April last year and we’re waiting for that period [again this year] to get an understanding. We’re up against that and if the customer is starting to feel some of the inflationary pressures this year and how that’s all going to play out along the next several months.” 

There’s also the escalating conflict in Ukraine, which could potentially impact consumers and their willingness to spend, of which Mathias said, “It’s something — depending on how long this lasts, because it’s not going to help supply chain disruptions and, or costs — we’re just keeping an eye on. The correlation to how long this lasts is definitely going to be something we’re going to be keeping an eye on for our business. In the week that it’s been — or the six, seven days — we haven’t seen anything specific that’s impacting the customer yet. 

“And if oil prices per barrel continue to increase, that’s not going to help freight costs either,” he added.  

American Eagle Outfitters ended the quarter with nearly $435 million in cash and cash equivalents and $341 million in long-term debt. 

Shares of American Eagle Outfitters are down approximately 16 percent, year-over-year. 

“Our hope is cautious guidance,” Mathias said. “Our $800 million [operating income] bottom line that we’re focused on in 2023 is still definitely achievable and in reach based on what we’re planning to achieve this year.”

AEO Inc. Reports Strong Fourth Quarter and Fiscal 2021 Results; Achieves Fiscal 2023 Goals for Structural Transformation Two Years Ahead of Schedule; Real Power. Real Growth. Plan Positions Company for Long-Term Revenue and Profit Growth

• Record Fiscal 2021 Revenue of $5 Billion; Up 33% versus Fiscal 2020 and up 16% versus Pre-Pandemic Fiscal 2019
• Adjusted Operating Profit Nearly Doubled versus Pre-Pandemic Fiscal 2019
• American Eagle and Aerie Expanded Customer Base, Fueling Record Revenue and Strong Profit Flow Through

March 2, 2022

PITTSBURGH — (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the fourth quarter and fiscal year ended January 29, 2022.

Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer, commented, “2021 was a milestone year for AEO. We crossed $5 billion in revenue for the first time in company history, grew our active customer file to record highs and achieved our strongest profit result in well over a decade. We leveraged our healthy cash position to fuel Aerie’s growth and made key acquisitions, creating an

industry-leading supply chain platform with significant long-term growth and profit potential. I’m incredibly proud of our associates and their outstanding performance in 2021, especially amidst ongoing macro challenges.”

“We entered 2022 a stronger company, supported by our powerful brands, a proven strategy, improved discipline and strategically advantaged operations. While the macro environment remains challenging and we are taking this into account in our plans for the year, we expect our results to still reflect meaningful progress versus prior years, setting a new base-line for profitability. As I look further out, I couldn’t be more excited as we build on our success and deliver returns to shareholders,” Mr. Schottenstein continued.

Fourth Quarter 2021 Results:

• Total net revenue increased $216 million, or 17% to $1.51 billion, compared to $1.29 billion in the fourth quarter of 2020.
• Aerie revenue of $428 million rose 27% from fourth quarter 2020 building on 25% growth last year. American Eagle revenue of $1.04 billion rose 11% versus fourth quarter 2020 following a 9% decline last year.
• Consolidated store revenue increased 32%. Total digital revenue declined -3%. Compared to the pre-pandemic fourth quarter 2019 base, store revenue increased 4% and digital revenue increased 31%.
• Gross profit of $489 million rose 11% from $440 million in the fourth quarter of 2020 and reflected a gross margin rate of 32.4% compared to 34.0% last year. Elevated freight costs amounted to a $80 million headwind in the quarter. Approximately $60 million was air freight specific to Vietnam factory closings, which was an approximately 400 basis point headwind to the gross margin rate. This was partially offset by strong product demand, customer delivery efficiencies, higher full-priced sales, lower promotions and inventory optimization initiatives.
• Selling, general and administrative expense increased 60 basis points as a rate to sales versus fourth quarter 2020 primarily due to higher wages for store associates and variable selling expenses.
• Operating income of $80 million included $80 million of elevated freight costs of which approximately $60 million was air freight specific to Vietnam factory closings.. Approximately half of the freight costs related to Aerie and the balance to the American Eagle brand.
• Adjusted operating income of $92 million, also including $80 million of elevated freight costs, excluded $12 million in impairment charges and compared to adjusted operating income of $106 million in the fourth quarter of 2020.
• Average diluted shares outstanding were 203 million, compared to 197 million in the fourth quarter of 2020. The increase primarily reflected 32 million shares of unrealized dilution associated with the company’s convertible notes this year, compared to 26 million shares in the fourth quarter of 2020.
• EPS of $0.25. Adjusted EPS of $0.35 this quarter excludes $0.04 of store impairment, $0.04 of reorganization costs related to our EU license operation, within other non-operating expense, and $0.02 of non-cash interest expense on the company’s convertible notes.

Fiscal Year 2021 Results

• Total net revenue increased $1.3 billion, or 33% to $5.0 billion, compared to $3.8 billion in fiscal year 2020. Compared to the pre-pandemic fiscal year 2019 base, total net revenue increased 16%.
• Aerie revenue of $1.4 billion rose 39% from fiscal year 2020 on top of 24% growth last year. American Eagle revenue of $3.6 billion rose 30% versus fiscal year 2020 following a -21% decline last year. Compared to the pre-pandemic fiscal year 2019 base, Aerie revenue increased 72% and AE revenue increased 2%.
• Reflecting migration back to stores, consolidated store revenue increased 53%. Total digital revenue increased 7%. Compared to the pre-pandemic fiscal year 2019 base, store revenue increased 3% and digital revenue increased 46%.
• Gross profit of $2.0 billion rose 73% from $1.1 billion in fiscal 2020 and reflected a gross margin rate of 39.7% compared to 30.5% last year. Gross margin expansion was driven by strong product demand, higher full-priced sales, lower promotions, rent savings, customer delivery efficiencies and inventory optimization initiatives. This was partially offset by elevated freight costs of approximately $90 million in the year, of which $70 million was air freight specific to Vietnam factory closings.
• Selling, general and administrative expense decreased 160 basis points as a rate to sales versus fiscal year 2020 due to strong revenue growth.
• Operating income of $591 million included approximately $90 million of elevated freight costs of which approximately $70 million was air freight specific to Vietnam factory closings.. Approximately half of the freight costs related to Aerie and the balance to the American Eagle brand.
• Adjusted operating income of $603 million, also including $90 million of elevated freight costs, excluded $12 million in impairment and compared to adjusted operating income of $8 million in fiscal year 2020.
• Average diluted shares outstanding were 207 million compared to 167 million in the fourth quarter of 2020. The increase primarily reflected 34 million shares of unrealized dilution associated with the company’s convertible notes this year.
• EPS of $2.03. Adjusted EPS of $2.19 this year excludes $0.04 of store impairment, $0.04 of reorganization costs related to our EU license operation, within other non-operating expense, and $0.07 of non-cash interest expense on the company’s convertible notes.

Inventory

Total ending inventory at cost increased 37% to $553 million compared to $405 million last year. The increase was partially driven by elevated freight costs and product mix. Total inventory units were up 14%. Additionally, ending inventory reflects earlier deliveries of Spring shipments to ensure product availability during ongoing supply chain disruptions.

Capital Expenditures

In the fourth quarter of 2021, capital expenditures totaled $90 million, and for the full-year totaled $234 million.

Cash Flow

The company ended the period with total cash of $435 million following the purchase of Quiet Logistics and strategic investments in December 2021 for approximately $360 million.

Shareholder Returns

The company’s fourth quarter cash dividend of $30 million was paid during the quarter.

Outlook

We are extremely confident in the strength of our brands and pleased with early performance of spring collections. Based on a number of macro uncertainties, however, we are taking a cautious view of 2022. For the year, we expect operating profit to be in the range of $550 to $600 million, compared to adjusted operating profit of $603 million in 2021. Our 2022 guidance reflects structural improvements to our business and significant growth from pre pandemic 2019, which posted adjusted operating profit of $314 million.

Due largely to stimulus in the first half of 2021, which contributed to an extraordinary Spring season, combined with continued freight pressures, we are forecasting an earnings decline in the first half, followed by a recovery in the second half as we lap elevated air freight due to factory closures and inventory flow challenges last year.

Conference Call and Supplemental Financial Information

Management will host a conference call and real time webcast today at 4:30 p.m. 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.

Non-GAAP Measures

This press release includes information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including consolidated adjusted operating income and earnings per share, excluding non-GAAP items. 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, as it helps identify underlying trends in our business that could otherwise be masked by the effect of the items that we exclude in such non-GAAP measures. Accordingly, we believe that adjusted operating income provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to the key financial metrics used by our management in our financial and operational decision-making.

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.

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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 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 200 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com.

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 our expectations or beliefs concerning future events, including first quarter and annual fiscal 2022 results. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “potential,” and similar expressions may identify forward-looking statements. 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 January 30, 2021 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 for fiscal 2022 and beyond 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 negative impacts of the COVID-19 pandemic and related operational disruptions; 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.

CONTACT:

Olivia Messina

412-432-3300

LineMedia@ae.com

03.2.22 NEW YORK – (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) announced the launch of the American Eagle (AE) brand’s Spring ’22 Members Always campaign. It’s an invitation into an optimistic, youth-led world where everyone is welcome. Headlining the campaign images and video are tennis player, Coco Gauff, actor and musician Joshua Bassett, actors Madelyn Cline, Maitreyi Ramakrishnan and Michael Evans Behling, and multi-hyphenate mxmtoon.

Building on AE’s leadership in social, commerce and gaming, the campaign extends into places where the Metaverse meets reality. Members Always will have extensions across Roblox, Snapchat and TikTok where the AE community can experience, shop, game and engage with the cast. AE will also unveil American Eagle Future Together Philanthropic Program to spotlight a passion for giving back, supporting its community and the causes that matter most to them.

“AE’s Members Always campaign represents our belief that this generation has the power to come together and create a place where everyone belongs. Coco, Joshua, Madelyn, Maitreyi, Michael and mxmtoon share a unique point of view on today’s world that empowers others to believe in the limitless possibilities of tomorrow,” said Jennifer Foyle, President – Executive Creative Director, AE & Aerie. “Our Spring collection is a fresh approach to nostalgic-inspired trends. Flares are back, so are wider and looser fits, and of course, the best of the 90s. The assortment  inspires customers to show up to be themselves.”

About the Members Always Campaign

• The Spring ‘22 Campaign taps into vintage nostalgia, prep vibes and looks for everyone.
  • AE has the best jeans fits for the season, mix and match with your favorite tops- feminine wovens, prep sweaters, boyfriend shirts, tiny layering tops and crew neck sports fleece.
  • Flares are back! Low-rise, high-rise, and iterated leg shapes among the 90s Flare and Festival. 
  • The Low + Loose is the look of the season, easing up your fit, with the new Low-Rise Skater and the relaunched Tomgirl fit across jeans, joggers and shorts.
  • For shorts, more options with longer inseams and looser fits are present among the Baggy Mom and 90s Bermuda.
  • For him, Athletic and Athletic Skinny fit jeans are slightly looser and eased up in the seat and thigh – with just enough stretch for unlimited movement.
  • Echoing the slightly looser, but still tailored, lived in shorts with a slightly shorter inseam ensure a modern fit that allows for comfort paired with classic resort tops and graphic t-shirts in bright, sun faded shades for him.
• To launch the campaign, AE will host a Members Always social liveseries featuring the all-star cast.  Tune in on Instagram @americaneagle today at 3:00PM EST, to participate in the first virtual conversation with Joshua and Coco to get to know them personally and hear the ways they’ve conquered adversity in their own experiences.

Creating Community in the Metaverse

• Making its debut with Roblox, AE will open a metaverse adaptation of the Members Always campaign on Livetopia, a top 10 role-playing game on the platform that has amassed over 1.5BN visits.  Gamers can explore the AE Members Always Club while collecting exclusive game items, including styles from the AE Spring collection to outfit their branded avatars.
• AE is elevating their presence on Snapchat through new augmented reality (AR) innovations and Marker Tech that helps merge the physical and digital worlds.
  • Snapchatters can use a new AE Lens to play an interactive AR tennis match where they earn points aiming for Spring collection targets and shop the collection.
  • Use Snapchat to scan the Coco Gauff-featured store window displays and unlock an immersive AR experience.  Powered by Snap Marker Tech, the display comes to life in the Snapchat camera.

American Eagle Future Together Philanthropic Program

• As part of AE’s belief that youth have the power to change the world, the brand introduces Future Together, a new philanthropic brand platform created to support and inspire the AE community and the causes they care about.
• This year, the brand will award $200,000 in total grants to twenty recipients, igniting their journey for positive change in their local communities. Customers will be invited to share their cause-driven mission for an opportunity to be selected as a grant recipient.
• The Spring cast will launch the program through social and volunteer initiatives with the causes and charity partners that are most meaningful to each of them.

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About American Eagle

Since 1977, American Eagle has offered an assortment of specialty apparel and accessories for men and women that enables self-expression and empowers our customers to celebrate their individuality. The brand has broadened its leadership in jeans by producing innovative fabric with options for all styles and fits for all at a value. We aren’t just passionate about making great clothing, we’re passionate about making real connections with the people who wear them. Visit www.ae.com to find your perfect pair of #AEJeans.

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 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 200 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com.