American Eagle Outfitters Surges After Q3 Earnings Beat

American Eagle Outfitters Inc AEO reported a third-quarter FY22 sales decline of 3% year-on-year to $1.24 billion, beating the consensus of $1.21 billion.
Net revenue from Aerie increased 11% Y/Y, and American Eagle fell 11%.
Consolidated store revenue decreased 4%, and digital revenue dropped 5% versus last year. Compared to the pre-pandemic Q3 2019 base, store revenue increased 3%, and digital revenue increased 35%.
Gross profit fell 15% Y/Y to $480 million, and the gross margin contracted 560 basis points Y/Y to 38.7%.
The operating margin was 9.5%, and operating income for the quarter was $118 million.
EPS of $0.42 beat the analyst consensus of $0.22.
The company held $82.1 million in cash and equivalents as of October 29, 2022.
Total consolidated ending inventory at cost increased 8% to $798 million.
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Outlook: For Q4, the company is guiding brand revenue down in the mid-single digits and expects brand comps to be consistent with the third quarter.
The company is also guiding Q4 gross margin in the range of 32% to 33%, at the higher end of previous guidance of low-30s.
The company continues to expect the fourth quarter-ending inventory to be down to last year.
Price Action: AEO shares are trading higher by 17.35% at $15.26 on the last check Tuesday.
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