American Eagle Outfitters, Inc. (AEO Quick QuoteAEO - Free Report) reported fourth-quarter fiscal 2021 results, wherein the bottom line was in line with the Zacks Consensus Estimate, while the top line lagged the same. Results gained from robust holiday demand, brand strength and the execution of the “Real Power. Real Growth.” plan.

The company also highlighted that it reached $5 billion in revenues for fiscal 2021. However, supply-chain disruptions and elevated freight costs acted as deterrents.

American Eagle’s shares declined more than 6% in the after-market session on Mar 2 due to elevated freight expenses. However, shares of the Zacks Rank #3 (Hold) company have fallen 18.4% in the past three months compared with the industry’s decline of 23.5%.

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Q4 Details

Adjusted earnings of 35 cents per share were in line with the Zacks Consensus Estimate. The bottom line declined 10.3% from earnings of 39 cents reported in fourth-quarter fiscal 2020.

Total net revenues of $1,508 million increased 17% year over year but lagged the Zacks Consensus Estimate of $1,515 million. Revenue growth was driven by sustained momentum across its brands and channels.

Brand-wise, revenues increased 11% to $1,043.3 million for AE, while it advanced 27% to $428.4 million for Aerie. This marked the 29th consecutive quarter of double-digit revenue growth for Aerie, driven by solid demand across apparel, intimates and off-line activewear categories.

The company’s digital revenues were down 3% year over year, while the same advanced 31% from fourth-quarter fiscal 2019. Store revenues improved 32% year over year, owing to increased store traffic. Store sales were up 4% from fourth-quarter fiscal 2019.

Gross profit improved 11% year over year to $489 million, while the gross margin contracted 160 basis points (bps) to 32.4%. This mainly resulted from $80 million of freight costs, out of which $60 million was from air freight expenses. On the flip side, strong demand, customer delivery efficiencies, higher full-priced sales, reduced promotions and better inventory levels remained upsides.

Selling, general and administrative (SG&A) expenses rose 19.7% year over year to $349.7 million. As a percentage of sales, S&A expenses expanded 60 bps to 23.2% due to a rise in store wages and variable selling expenses.

Adjusted operating income in the fiscal fourth quarter was $92 million, down 13.2% from $106 million in the year-ago quarter. Adjusted operating income for the Aerie brand was $22.7 million compared with an operating loss of $87.3 million. The AE brand reported growth of 25%. The operating margin contracted 210 bps to 6.1% from fourth-quarter fiscal 2020 adjusted operating margin levels.

Other Financial Details

American Eagle ended fiscal 2021 with cash and cash equivalents of $434.8 million. Total shareholders’ equity as of Jan 29, 2022, was $1,423.7 million.

AEO paid out dividends worth $30 million in the fiscal fourth quarter. The company’s capital expenditure was $90 million in the reported quarter.

Concurrent to the earnings release, the company declared a quarterly cash dividend of 18 cents per share. The dividend is payable on Mar 24 to shareholders of record as of Mar 11.

Store Update

In fourth-quarter fiscal 2021, American Eagle inaugurated eight AE, 31 Aerie stand-alone stores and two Todd Snyder stores, while it closed 26 AE and three Aerie stand-alone stores. The company remodeled and refurbished nine stores in the fiscal fourth quarter.

At the end of the quarter, American Eagle operated 1,133 stores, comprising 880 AE, 244 Aerie stand-alone, 197 Aerie side-by-side and five Todd Synder stores. Additionally, it operated 248 international license outlets.

Guidance

For fiscal 2022, management anticipates operating profit of $550-$600 million compared with $603 million reported in the prior year. Also, earnings are expected to decline in the first half of fiscal 2022 due to continued freight pressures, followed by a potential recovery in the second half.

Stocks to Consider

Here are three better-ranked stocks — DICK'S Sporting Goods (DKS Quick QuoteDKS - Free Report) , Boot Barn Holdings (BOOT Quick QuoteBOOT - Free Report) and Wolverine World Wide (WWW Quick QuoteWWW - Free Report) .

Boot Barn Holdings, the leading lifestyle retailer of western and work-related footwear, apparel and accessories, currently flaunts a Zacks Rank #1(Strong Buy). In the last reported quarter, the company posted adjusted earnings of $2.23 per share. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago period. BOOT has an expected EPS growth rate of 20% for three-five years.

Wolverine World Wide is one of the leading marketers and licensors of a branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel. It currently flaunts a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 18.3%, on average.

The Zacks Consensus Estimate for Wolverine World Wide’s current financial-year sales and EPS suggests growth of 34.4% and 125.8%, respectively, from the year-ago period. WWW has an expected EPS growth rate of 10% for three-five years.

DICK'S Sporting Goods, a sporting goods retailer, presently sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 104.2%, on average.

The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial-year sales and EPS suggests growth of 27.8% and 151.6%, respectively, from the year-ago period. DKS has an expected EPS growth rate of 11.7% for three-five years.