American Eagle (AEO) earnings Q1 2024

American Eagle said Wednesday that it is making gains in terms of increasing its profitability while working to improve its product assortment and fine-tune its operations. Still, its fiscal first quarter sales were weaker than Wall Street expected.

Nonetheless, revenue increased 6% year-over-year and marked a record for the first quarter, the company said in a press release.

Shares fell about 5% in extended trading Wednesday.

Here’s how the clothing company performed compared to what Wall Street expected, based on a survey of analysts by LSEG:

  • Earnings per share: 34 cents against 28 cents expected
  • Income: $1.14 billion versus $1.15 billion expected

The company’s reported net profit for the three months ended May 4 almost quadrupled from the year-ago period. American Eagle reported net income of $67.8 million, or 34 cents per share, compared with $18.5 million, or 9 cents per share, a year earlier.

Sales increased to $1.14 billion from $1.08 billion a year earlier.

American Eagle said it continues to expect operating profit in the range of $445 million to $465 million, reflecting revenue growth of 2% to 4% from the prior year. This is slightly below estimates of a 3.4% increase, according to LSEG.

Chief Financial Officer Mike Mathias told CNBC that American Eagle is maintaining a “cautious” outlook for the second half of the year as it prepares for tougher benchmarks, awaits rate decisions. interest of the Federal Reserve and prepares for the “noise” around the next presidential election. election.

He added that the company is waiting to see how the back-to-school shopping season goes to get a better idea of ​​how the rest of the year will go.

For the current quarter, American Eagle expects operating income in the range of $95 million to $100 million, reflecting high-single-digit revenue growth, consistent with the 7 .4% expected by analysts, according to LSEG.

The clothing company, which operates its namesake banner and lingerie brand Aerie, is in the midst of a new strategy to drive growth. The goal is to increase sales by 3% to 5% per year over the next three years and increase its operating margin to around 10%.

Some of his efforts are starting to pay off. During the fiscal first quarter, American Eagle increased its gross margin by 2.4 percentage points. The gains are due to better inventory management, lower product and transportation costs, and leverage on expenses including rent, delivery, distribution, and warehousing.

American Eagle’s strategy also focused on revamping its product assortment, removing items that weren’t working for its customers and digging deeper into categories that resonated.

Jennifer Foyle, president and executive creative director of American Eagle, told CNBC that the company was simply “over-skued” — meaning it had too many different individual products, often referred to in the industry SKUs, from which consumers could choose.

“We knew we could do more with less,” Foyle said. “Greater investments in our stockings but fewer SKUs so we can serve our customers on the cuts they demand of us.”

The company has also worked to revamp its stores and introduce new formats. She recently implemented a new store design for American Eagle that “exceeds the balance of the chain,” Foyle said.

“We are excited to renovate our stores with a new feeling for the brand that I think expresses exactly what we have been doing,” she said. “The customer obviously likes what they see in the design of this store based on the results.”

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Sara Adm

Aimant les mots, Sara Smith a commencé à écrire dès son plus jeune âge. En tant qu'éditeur en chef de son journal scolaire, il met en valeur ses compétences en racontant des récits impactants. Smith a ensuite étudié le journalisme à l'université Columbia, où il est diplômé en tête de sa classe. Après avoir étudié au New York Times, Sara décroche un poste de journaliste de nouvelles. Depuis dix ans, il a couvert des événements majeurs tels que les élections présidentielles et les catastrophes naturelles. Il a été acclamé pour sa capacité à créer des récits captivants qui capturent l'expérience humaine.
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