American Eagle unveils ambitious growth plans for Aerie
Pittsburgh-based fashion retailer American Eagle Outfitters, Inc. (AEO) has revealed a new long-term growth strategy that involves ambitious revenue targets for its Aerie intimates and lifestyle brand, as well as the reorganization of its brick-and-mortar network.
AEO’s “Real Plan. Real Growth.” strategy aims to double Aerie revenues to $2 billion by fiscal 2023, while also returning the company’s flagship American Eagle brand to profit growth.
To do so, the retailer said that it intends to leverage its customer-focused capabilities and continue to strengthen its ROI discipline, while also developing its talent, culture and purpose.
Through these efforts, the company hopes that Aerie’s revenues will increase at a mid-20% compound annual growth rate (CAGR) over the next three years. The American Eagle brand, however, is expected to see its sales remain more or less flat to fiscal 2019, at around $3.5 billion, but with improved profitability.
AEO therefore predicts that full-company revenues will increase to approximately $5.5 billion by fiscal 2023. Adjusted operating income is expected to be $550 million, excluding potential asset impairment and restructuring charges, with the retailer’s operating margin expanding to 10%.
“2020 demonstrated the strength of our organization, our brands and our capabilities – and we are emerging with momentum,” said AEO CEO and chairman Jay Schottenstein in a release. “As the pace of change and innovation accelerated over the past year, I believe the environment is ripe with potential, and I see more opportunity for AEO than ever before.”
In a virtual meeting with investors, CFO Mike Mathias further revealed that the company, which currently runs around 880 physical retail locations, is planning to permanently close between 200 and 250 stores in the next three years, principally in malls.
At the same time, the retailer will be boosting Aerie’s brick-and-mortar network, bringing its fleet up by 50 stores to a total of around 400 by the end of 2021. By the end of 2023, the company intends to be operating between 500 and 6000 Aerie locations.
On Thursday, AEO also reported predicted financial results for the fourth quarter. The company expects quarterly sales at Aerie to increase in the high-20% range, while the forecast for American Eagle is a revenue decline in the low double-digit range.
Overall, the company expects to report a low-single-digit decrease in its quarterly revenues and adjusted operating income of more than $95 million, an improvement from the prior-year period, thanks to improved margins.
According to the company, digital sales remained strong throughout the quarter, but brick-and-mortar locations suffered from weak mall traffic, temporary store closures and reduced opening hours, all due to the effects of the ongoing Covid-19 pandemic. These issues proved to be particularly problematic for American Eagle because of its higher store penetration.
AEO intends to release its full fourth quarter and fiscal 2020 financial results on March 3, 2021.
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