A shopper wearing a protective mask walks past a sale sign at an American Eagle Outfitters Inc. clothing store at Westfield San Francisco Centre in San Francisco, California, U.S., on Thursday, June 18, 2020.
Michael Short | Bloomberg | Getty Images
American Eagle ahead of a virtual meeting with investors Thursday said it expects fourth-quarter revenue to decrease in the low-single digits, driven by a drop in brick-and-mortar store sales due to weak mall traffic during the Covid pandemic.
That comes in lower than analysts’ estimates, which were for a 0.14% dip, according to data from Refinitiv.
The apparel retailer said it expects momentum to continue online, with digital sales at both of its brands growing double digits. Its lingerie brand for teens, Aerie, is forecast to grow fourth-quarter revenue in the high-20% range, the company said, while its namesake American Eagle brand is forecast to see sales drop in the low double-digit range.
American Eagle shares were falling around 2% in premarket trading. The stock is up about 54% over the past 12 months.
A number of mall-based retailers including Nordstrom and Urban Outfitters have reported weak 2020 holiday sales, as many Americans have been staying put at home, shopping from the sofa, and buying less apparel and footwear for their closets. Retailers like American Eagle, that rely on apparel sales, have tried to stock their shelves with more comfortable clothing, such as leggings and pajama sets, that consumers have been looking to wear more of during the pandemic.
Management said the retailer’s tailored selection of merchandise during the holidays helped it to sell more at full price.
“Compelling holiday product and marketing, combined with a disciplined approach to promotional activity drove very strong margin results,” Chief Executive Jay Schottenstein said in a statement. “I believe we are well-positioned as we head into 2021.”
The retailer is expected to report its fourth-quarter and fiscal 2020 results on March 3.
In a separate press release Thursday, American Eagle laid out longer-term financial targets, aiming to grow its Aerie business to $2 billion, while it works on improving profits at its namesake banner.
“Aerie has been posting among the best growth in retail, and therefore $2 billion seems a reasonable target to present,” BMO Capital Markets senior analyst Simeon Siegel said in an interview. “But it also seems fair investors may have been looking for more.”
The rapid growth of the Aerie brand, which sells everything from bras and underwear to swimsuits and sweatpants, is making it a much stronger competitor to L Brands‘ Victoria’s Secret business, he added.
Overall, American Eagle said it is targeting revenue of $5.5 billion, and operating income of $550 million, in fiscal 2023. In its latest reported fiscal year, it brought in revenue of $4.31 billion.