Published on 19 Jan 2022 on Zacks via Yahoo Finance
Will Growth Plans Aid American Eagle (AEO) as 2022 Unfolds?
American Eagle Outfitters, Inc. AEO has been gaining from significant progress in its Real Power Real Growth value creation plan. The plan is driving profitability through real estate and inventory optimization efforts, omni-channel and customer focus, and investments to improve the supply chain. Robust consumer demand for its merchandise and brands has been aiding its performance.Strength in the digital business is another driver. The company’s efforts to expand its omnichannel capabilities have been aiding digital sales. Driven by the trends and progress on its growth plan, American Eagle expects to deliver a robust fourth quarter and fiscal 2021. It also raised its 2023 financial targets.The company expects to achieve an operating income of $600 million in fiscal 2021. This will help it surpass its fiscal 2023 operating income and margin goals two years ahead of schedule.As a result, management raised the 2023 financial targets. AEO now expects revenues of $5.8 billion, up from earlier mentioned $5.5 billion. The operating income is estimated to be $800 million, with the operating margin expanding to 13.5% by 2023. Previously, the operating income and the operating margin were anticipated to be $550 million and 10%, respectively. The revised view doesn’t include asset impairment and restructuring charges.The company expects revenues for the Aerie brand to reach $2.2 billion by 2023, seeing more than a 20% compound annual growth rate compared with fiscal 2019. The American Eagle brand is also envisioned to grow slightly from fiscal 2019, with $3.6 billion in revenues.American Eagle updated the fourth-quarter fiscal 2021 view as well, which suggests gains from solid demand and pricing actions. It anticipates fourth-quarter revenue growth in a mid-to-high teens range on a year-over-year basis and mid-teens growth on a two-year basis. The operating income is likely to be $90-$100 million, inclusive of freight expenses of $80 million stemming from supply-chain disruptions.Shares of the Zacks Rank #3 (Hold) company have gained 2% in a year against the industry’s and the sector’s declines of 26.7% and 16.2%, respectively.
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