American Eagle Outfitters (AEO) stated that although the macro environment remains highly dynamic, it is seeing encouraging trends.
By brand, the company said Aerie’s revenue and comparable sales increased 12% to $393m in the third quarter, and American Eagle’s revenue and comps increased 2% to $857m with a comparable sales increase of 2%.
The company’s digital channel was reported as the “star performer”, accelerating to 10% growth due to AEO introducing innovative customer engagement tactics, enhancing its user data and analytics to drive stronger key performance indicators (KPIs).
AEO announced that it had achieved its second-highest third-quarter gross margin and operating income in over a decade.
The apparel company attributed the launch of its profit improvement programme, to structural initiatives that have driven growth and higher margins.
Profit enhancements were achieved by AEO through effective management of inventory and disciplined promotional strategies.
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The company also implemented a more lucrative clearance strategy, successfully expanded its Aerie brand, strategically adjusted its product mix to focus on higher-margin categories, upgraded its delivery network to lower costs, and optimised the real estate footprint of its flagship brand, AE.
“I am pleased with our third quarter results which demonstrated the strength of our brands and reflected continued progress on our growth and profit improvement initiatives. Our strategic priorities, underpinned by our customer-first focus and commitment to operational excellence, are propelling us forward,” commented Jay Schottenstein, AEO’s CEO and executive chairman of the board of directors.
He added: “Momentum has continued across the business into the fourth quarter, driven by strong holiday assortments, engaging marketing campaigns and solid execution, supporting our improved outlook for the rest of the year.”
Key highlights from American Eagle Outfitters Q3 results:
- Revenue was up 5% to $1.3bn
- Operating income increased 9.6% to $125.3m
- Net income rose 7.4% to $96.7m
Gross profit increased 13% to $544m and reflected a gross margin rate of 41.8%, up 310 basis points.
For Fiscal 2023, the company anticipates revenue growth in the mid-single digits, with operating income expected to be in the range of $340m – $350m, at the high end of prior guidance of $325m to $350m.
The fourth quarter outlook is positive, with expected revenue growth in the high-single digits and operating income between $105m-$115m.
“Looking ahead, we remain focused on advancing our long-term strategic priorities, as we seek to create consistent growth across our portfolio of brands and generate efficiencies for improved profit flow-through. We are set up to deliver on both in 2024,” said AEO’s CEO.