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American Eagle (AEO) Aided by Aerie Amid Macroeconomic Woes
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American Eagle Outfitters (AEO - Free Report) has been benefiting from cost-reduction efforts, strength in Aerie and a solid online show. Also, its Real Power Real Growth value creation plan bodes well. This led to first-quarter fiscal 2023 results, wherein its earnings were in line with the Zacks Consensus Estimate while sales beat the same.
Management noted that fiscal 2023 started on a positive note on the back of solid brands and a focus on inventory discipline. AEO’s Aerie and American Eagle brands witnessed substantial improvement in the quarter and maintained strength in their categories. Adjusted earnings of 17 cents per share increased 6.3% from adjusted earnings of 16 cents reported in the first quarter of fiscal 2022. Total net revenues of $1,080.9 million increased 2.5% year over year.
For Aerie, sales rose 12% to $359 million while comps grew 2% in first-quarter fiscal 2023. The brand reached $1.5 billion in revenues in 2022, driven by store expansion. Strength across seasonal tops and new bottom silhouettes acted as major growth drivers. Also, its activewear extension, OFFLINE by Aerie, performed well on the back of tops, sports bras, active shorts and fashion items.
Recently, Aerie launched the Real You summer campaign, which showcases its new summer collection, including the crowd-favorite Pool-To-Party capsule. Management previously launched its largest integrated marketing campaign, namely, Voices of AerieREAL. The Aerie brand is a key growth engine for American Eagle and remains on track to reach the next brand milestone of $2 billion in sales, out of which it has already achieved $1.5 billion in revenues.
Also, it remains on track with its Real Power Real Growth value creation plan, which has been aiding performance. The plan is driving profitability through real estate and inventory optimization efforts, omnichannel and customer focus, and investments to improve the supply chain.
As part of the Real Power Real Growth plan, American Eagle will continue to pursue opportunities to grow the Aerie brand through expansion into newer markets, innovation and a growing customer base. The company’s efforts under the plan have aided the recovery of the American Eagle brand. Going forward, it expects to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.
Driven by the trends and progress on its growth plan, American Eagle raised its 2023 financial targets. The company now expects to achieve an operating income of $800 million in fiscal 2023. It also expects revenues of $5.8 billion in fiscal 2023, up from the earlier mentioned $5.5 billion.
Operating income is estimated to be $800 million, with the operating margin expected to reach 13.5% by 2023. Previously, the operating income and the operating margin were anticipated to be $550 million and 10%, respectively. Earlier, the company expected revenues for the Aerie brand to reach $2.2 billion by 2023, indicating a more than 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.
However, the company has been reeling under the ongoing uncertain macro landscape and the overall consumer spending pattern. This led management to issue cautious guidance for fiscal 2023. For fiscal 2023, revenues are likely to be flat to down in the low-single digits. The operating income is anticipated to be $250-$270 million compared with the adjusted operating income of $269 million in fiscal 2022. For the fiscal second quarter, it expects revenues to decline in the low-single digits on a year-over-year basis. The company expects SG&A to increase in the low to mid-single digits.
Image Source: Zacks Investment Research
Consequently, shares of AEO have lost 12.4% in the past three months compared with the industry’s decline of 4.3%.
Conclusion
Despite the ongoing challenging economic landscape, we believe that solid online shows, robust demand and brand strength are likely to help the stock get back on track. Topping it, a VGM Score of A and a long-term earnings growth rate of 4.6% raises optimism in this Zacks Rank #3 (Hold) stock.
Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Kroger’s current financial year’s earnings per share suggests growth of 6.6% from the year-ago reported figure. KR has an expected earnings per share growth rate of 6% for three to five years.
TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2 at present. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5%, respectively, from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.
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American Eagle (AEO) Aided by Aerie Amid Macroeconomic Woes
American Eagle Outfitters (AEO - Free Report) has been benefiting from cost-reduction efforts, strength in Aerie and a solid online show. Also, its Real Power Real Growth value creation plan bodes well. This led to first-quarter fiscal 2023 results, wherein its earnings were in line with the Zacks Consensus Estimate while sales beat the same.
Management noted that fiscal 2023 started on a positive note on the back of solid brands and a focus on inventory discipline. AEO’s Aerie and American Eagle brands witnessed substantial improvement in the quarter and maintained strength in their categories. Adjusted earnings of 17 cents per share increased 6.3% from adjusted earnings of 16 cents reported in the first quarter of fiscal 2022. Total net revenues of $1,080.9 million increased 2.5% year over year.
For Aerie, sales rose 12% to $359 million while comps grew 2% in first-quarter fiscal 2023. The brand reached $1.5 billion in revenues in 2022, driven by store expansion. Strength across seasonal tops and new bottom silhouettes acted as major growth drivers. Also, its activewear extension, OFFLINE by Aerie, performed well on the back of tops, sports bras, active shorts and fashion items.
Recently, Aerie launched the Real You summer campaign, which showcases its new summer collection, including the crowd-favorite Pool-To-Party capsule. Management previously launched its largest integrated marketing campaign, namely, Voices of AerieREAL. The Aerie brand is a key growth engine for American Eagle and remains on track to reach the next brand milestone of $2 billion in sales, out of which it has already achieved $1.5 billion in revenues.
Also, it remains on track with its Real Power Real Growth value creation plan, which has been aiding performance. The plan is driving profitability through real estate and inventory optimization efforts, omnichannel and customer focus, and investments to improve the supply chain.
As part of the Real Power Real Growth plan, American Eagle will continue to pursue opportunities to grow the Aerie brand through expansion into newer markets, innovation and a growing customer base. The company’s efforts under the plan have aided the recovery of the American Eagle brand. Going forward, it expects to undertake initiatives to deliver growth and sustained profitability for the American Eagle brand.
Driven by the trends and progress on its growth plan, American Eagle raised its 2023 financial targets. The company now expects to achieve an operating income of $800 million in fiscal 2023. It also expects revenues of $5.8 billion in fiscal 2023, up from the earlier mentioned $5.5 billion.
Operating income is estimated to be $800 million, with the operating margin expected to reach 13.5% by 2023. Previously, the operating income and the operating margin were anticipated to be $550 million and 10%, respectively. Earlier, the company expected revenues for the Aerie brand to reach $2.2 billion by 2023, indicating a more than 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.
However, the company has been reeling under the ongoing uncertain macro landscape and the overall consumer spending pattern. This led management to issue cautious guidance for fiscal 2023. For fiscal 2023, revenues are likely to be flat to down in the low-single digits. The operating income is anticipated to be $250-$270 million compared with the adjusted operating income of $269 million in fiscal 2022. For the fiscal second quarter, it expects revenues to decline in the low-single digits on a year-over-year basis. The company expects SG&A to increase in the low to mid-single digits.
Image Source: Zacks Investment Research
Consequently, shares of AEO have lost 12.4% in the past three months compared with the industry’s decline of 4.3%.
Conclusion
Despite the ongoing challenging economic landscape, we believe that solid online shows, robust demand and brand strength are likely to help the stock get back on track. Topping it, a VGM Score of A and a long-term earnings growth rate of 4.6% raises optimism in this Zacks Rank #3 (Hold) stock.
Stocks to Consider
Some better-ranked stocks that investors may consider are Tecnoglass (TGLS - Free Report) , Kroger (KR - Free Report) and TJX Companies (TJX - Free Report) .
Tecnoglass manufactures and sells architectural glass and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 18.1% and 23.8%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 22.7%, on average.
Kroger, a renowned grocery retailer, currently carries a Zacks Rank of 2 (Buy). KR has a trailing four-quarter earnings surprise of 9.8%, on average.
The Zacks Consensus Estimate for Kroger’s current financial year’s earnings per share suggests growth of 6.6% from the year-ago reported figure. KR has an expected earnings per share growth rate of 6% for three to five years.
TJX Companies, which operates as an off-price apparel and home fashion retailer, carries a Zacks Rank #2 at present. The expected EPS growth rate for three to five years is 10.5%.
The Zacks Consensus Estimate for TJX Companies’ current financial-year sales and earnings suggests growth of 6.4% and 14.5%, respectively, from the year-ago period. TJX has a trailing four-quarter earnings surprise of 4.4%, on average.