US apparel brand American Eagle Outfitters (AEO) says business is exceeding expectations with first-quarter revenue on track to top US$1bn, a mid-teens increase on the same period a year ago and pre-Covid-19.

Demand has accelerated across the American Eagle and Aerie brands, generating strong margins, higher full-priced selling, and reduced promotions. For the three months to 1 May, management expects operating income of about $120m, compared to $48m last year.

AEO’s growth priorities centered on the “Real Power. Real Growth.” value creation plan are having a meaningful impact, fuelling brands, channels and attracting new customers, the company says. External factors, such as economic stimulus, renewed consumer optimism and pent-up demand are also positively contributing to business performance.

“In light of the current environment, it’s truly gratifying to see consumer optimism, strong demand across channels, and loyalty for our brands continue. I’m amazed by the incredible momentum of Aerie, which is consistently reaching new heights and exceeding our expectations,” says CEO Jay Schottenstein. “We are seeing great progress at American Eagle, with stronger merchandise, marketing and inventory management clearly demonstrating the power and true potential of our leading brand.

“Looking forward, I have never been more optimistic about our future than I am today. We remain disciplined and focused on delivering profit growth through our Real Power. Real Growth value creation plan, with our sights set on achieving our 2023 financial targets and generating superior shareholder returns.”

Susan Anderson, analyst at B Riley, notes the forecasts are above the firm and Street’s estimates for $888.7m-$905.4m in first-quarter revenue and $51.3m-$55.4m in operating income. 

“Last week we saw AEO start to pull back on Aerie promos in-store and no longer offered their entire selection with a markdown. We believe this very rational promo environment can help drive profitability for both AEO and ANF throughout FY21 and also “train” the customer to not look for a promo to convert on a sale,” Anderson notes.

“For AEO, we believe management will continue to drive profitability by improving merch margins and will continue to benefit from Aerie expansion.”

The company will report its first-quarter 2021 results on 26 May.

AEO posted a 2% drop in total net revenue to $22m for the fourth quarter, while comparable sales declined 1%. Net income in the period fell to $3.53m from $4.76m last time.