American Eagle Outfitters, Inc. AEO is benefiting from its digital endeavors and other robust strategies, including the Powering Profitable Growth Plan. The company is gaining from brand strength and solid demand for its products that resonate well with customers. Buoyed by such tailwinds, management has announced sturdy holiday results.
AEO witnessed record sales in December, benefiting from great product assortments and engaging customer experiences. Management raised its view for the fourth quarter of fiscal 2024 on robust trends seen across brands and holiday results.
The company said that fourth quarter-to-date comparable sales (comps) through Jan. 4, 2025, increased in low-single digits, well ahead of the recent outlook of being positive 1%. We note that the trends across American Eagle and Aerie remained positive.
Management now envisions fourth-quarter operating profit to be nearly $135 million, up from the earlier guidance of $125-$130 million. This is based on a comps rise of about 2% for the final quarter of fiscal 2024 compared with the 8% rise in the prior year.
Fourth quarter-to-date, AEO bought back 1.5 million shares for $27 million, bringing total repurchases to 7.5 million shares for $158 million. The company still had 22.5 million shares available for repurchase under its current authorization.
Hence, the company has returned $231 million in cash to shareholders via dividends and share repurchases for the year-to-date period.
Despite record sales in December and a raised fourth-quarter view, shares of this Zacks Rank #5 (Strong Sell) company fell nearly 5% yesterday. Shares of this apparel and footwear dealer have lost 25.9% against the industry’s 11.1% growth in the three-month time frame.
We note that investors remain cautious about challenges from retail calendar shifts, increased markdowns and a tough macro landscape, including evolving consumer spending patterns. American Eagle has been grappling with soft margins for a while owing to increased markdowns.
Impacts from the retail calendar shift will hurt the company’s overall revenues, which will decline approximately 5%. In the fourth quarter, this is likely to impact revenues to the tune of $85 million and $60 million in fiscal 2024. Although the comps outlook surpassed the previous view for the fiscal fourth quarter, it still indicates a sharp decline from 8% growth witnessed in the same period the prior year.
We have highlighted three better-ranked stocks, namely Deckers DECK, Abercombie ANF and Boot Barn BOOT.
Deckers, a footwear and accessories dealer, 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 Deckers’ current financial-year sales indicates growth of 13.6% from the year-ago figure. DECK delivered an average earnings surprise of 41.1% in the trailing four quarters.
Abercrombie, a leading casual apparel retailer, currently carries a Zacks Rank of 1. ANF delivered an earnings surprise of 16.8% in the last reported quarter.
The consensus estimate for Abercrombie’s current financial-year sales indicates growth of 13% from the year-ago figure.
Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently carries a Zacks Rank #2 (Buy). The company delivered a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for Boot Barn’s current financial-year sales indicates growth of 13.4% from the year-ago figure.
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Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
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