American Eagle Outfitters (AEO) has reported a record fourth-quarter net revenue, up 12 per cent from last year to $1.7 billion.
The brand’s merchandise collections fueled positive results across brands and channels, with Aerie‘s revenue of $538 million up 16 per cent and American Eagle’s revenue of $1.1 billion increasing 11 per cent.
Jay Schottenstein, executive chairman of the board and CEO at AEO, attributed the results to the teams’ successful execution in the fourth quarter.
“As our profit improvement initiatives took hold, we delivered a material improvement in business, underscoring the power of our brands, operations, and strategic focus,” explained Schottenstein.
“Customers responded well to our strong merchandise collections fueling positive results across brands and channels.”
“Strong” business performance
The company’s GAAP gross profit for the fourth quarter was $615 million, while its adjusted gross profit was $626 million, up 23 per cent.
Meanwhile, Its adjusted gross margin rate of 37.3 per cent rose 340 basis points, driven by strong demand, lower product, and transportation costs, and continued benefits from the company’s profit improvement work, including lower markdowns and leverage on rent, distribution, warehousing, and delivery.
AEO’s selling, general, and administrative expenses were $427 million, up 22 per cent, aligned with solid business performance.
The company said roughly half of the expense increase was due to incentive compensation against zero accruals last year, while store and corporate compensation, advertising, and the 53rd week contributed.
Its GAAP operating income for the fourth quarter was $9 million, while its adjusted operating income was $141 million. The adjusted operating margin of 8.4 per cent expanded 200 basis points to last year.
Meanwhile, AEO’s total ending inventory increased 9 per cent to $641 million, with units up 11 per cent.
Capital expenditure
Capital expenditure reached $39 million in the fourth quarter and $174 million for the full year with the company planning a further $200 to $250 million commitment for FY2024.
Meanwhile, management has set an expected operating income of $445 to $465 million for FY2024. This projection reflects revenue growth of 2 to 4 per cent from last year, taking into account a one-point reduction resulting from one less selling week due to a retail calendar shift.
“We are entering 2024 with momentum and from a position of strength with an exciting line-up of innovation and customer engagement initiatives,” added Schottenstein.
“Our balance sheet is healthy, and we are seeing early proof points of our new long-term strategy to deliver industry-leading earnings growth and shareholder returns.”
