American Eagle sees holiday-quarter sales dropping low-single digits amid weak mall traffic

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, said Thursday 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 comes 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 both of its brands growing double digits. It said its lingerie brand for teens, 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.

American Eagle shares were up 1.2% in early trading Thursday. The stock is up about 54% over the past 12 months.

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.”

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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. “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.

Read the press releases here.


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