Aerie leads sales growth at American Eagle; profits take hit

By

Robin Driver

Published
Mar 5, 2020

American Eagle Outfitters, Inc. (AEO) posted record fourth-quarter sales of $1.31 billion on Wednesday, as its Aerie lingerie brand continued to experience strong growth. Profits, on the other hand, suffered from higher expenses and markdowns.
 
In the fourth quarter ended February 1, 2020, the Pittsburgh-based company’s net sales increased 6% from $1.24 billion in the prior-year period, while comparable sales rose 2%, compared to a 6% increase in Q4 2018.
 
The group’s Aerie banner posted a 26% comps rise, marking the 21st consecutive quarter of double-digit comparable sales growth at the brand. Over at the company’s namesake American Eagle brand, comparable sales decreased 3%, although the banner did see growth in its signature jeans and bottoms categories.
 

Total quarterly net income was $4.76 million, or $0.03 per share, a significant drop from $76.17 million, or $0.43 per share, in the same period in the previous year.
 
The company’s bottom line was negatively impacted by higher markdowns, which knocked gross margin rate down from 34.6% to 31.0%, while impairment and restructuring charges also took their toll.

For the full fiscal year 2019, AEO reported record sales of $4.3 billion, up 7% from $4.0 billion in fiscal 2018. Comps increased 3% year over year.
 
Comparable sales at Aerie rose 20%, and the American Eagle brand also managed a slight increase.
 
Annual net income came to $191.3 million, or $1.12 per share, down from $261.90 million, or $1.47 per share.
 
“Although we faced some challenges in 2019, we made good progress on our strategic growth pillars, posting record revenues. We saw strong customer engagement and positive traffic across brands and channels,” said AEO chairman and CEO Jay Schottenstein in a release. “Looking ahead, we are laser focused on areas of underperformance and strengthening profit margins. Product improvements, inventory management and gaining efficiencies are top priorities.”
 
In the first quarter of fiscal 2020, AEO predicts its comparable sales will increase in the low single digits, while earnings per share are expected to be in the range of $0.20 to $0.22.
 
The company opened 27 American Eagle stores and 37 standalone Aerie locations in fiscal 2019, and closed 25 stores across both banners, finishing the year with a total of 1,095 company-owned brick-and-mortar stores. AEO also has 217 licensed global stores.  
 
Shares in AEO were up over 6% in after-hours trading on Wednesday.