By guest author Lauren Thomas from CNBC
- American Eagle outlined its plans to close hundreds of stores in the coming years, while it looks to grow Aerie to a USD 2 billion business.
- Chief Financial Officer Mike Mathias said the company, which has about 880 stores, is looking to shut between 200 and 250 mostly mall-based locations in the next two to three years.
- Meantime, it plans to grow the number of Aerie stores by 50, to about 400 at the end of 2021, and is targeting having 500 to 600 Aerie locations in 2023.
American Eagle shares rose Thursday afternoon, as the teen apparel retailer outlined plans to close hundreds of stores in the coming years, while it looks to grow it lingerie and active-wear brand Aerie to a USD 2 billion business.
The stock was last up more than 3 %
Chief Financial Officer Mike Mathias said during a virtual meeting with investors that the company, which has about 880 stores, is looking to shut between 200 and 250 mostly mall-based locations in the next two to three years. Meantime, it plans to grow the number of Aerie stores by 50, to about 400 at the end of 2021, and is targeting having 500 to 600 Aerie locations in 2023.
“It’s a tale of two brands,” the CFO explained.
American Eagle had said January 21, 2021 morning it expects fourth-quarter revenue to decrease in the low-single digits, driven by a drop in brick-and-mortar sales due to weak mall traffic during the Covid pandemic. That came in lower than analysts’ estimates, which expected a 0.14 % dip, according to Refinitiv.
The apparel retailer said it expects momentum to continue online, with digital sales at all of its brands growing double digits. It said Aerie is forecast to grow fourth-quarter revenue in the high-20 % range, while its namesake American Eagle brand is forecast to see sales drop in the low double digits.
Mall-based retailers including Nordstrom and Urban Outfitters have reported weak 2020 holiday sales, as many Americans stayed home, shopping from the sofa, and buying less apparel and footwear. 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 preferred to wear during the pandemic.
Management said the retailer’s tailored selection of merchandise during the holidays helped it to sell more items 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, January 21, 2021, American Eagle laid out longer-term financial targets, aiming to grow its Aerie business to USD 2 billion, while it works on improving profits at its namesake banner.
“Aerie has been posting among the best growth in retail, and therefore USD 2 billion seems a reasonable target to present,” BMO Capital Markets senior analyst Simeon Siegel said. “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 USD 5.5 billion, and operating income of USD 550 million, in fiscal 2023. In its latest reported fiscal year, it brought in revenue of USD 4.31 billion.
American Eagle shares are up about 63 % over the past 12 months.