Why American Eagle Outfitters Shares Are Rising After Q4 Earnings

American Eagle Outfitters, Inc. AEO shares are trading higher on Thursday. 

The company reported fourth-quarter adjusted earnings per share of 61 cents, beating the analyst consensus of 50 cents. 

Quarterly revenues of $1.679 billion beat the street view of $1.66 billion. Sales rose 12% year over year. 

Store revenue rose 10%. Total digital revenue increased 19%. American Eagle fourth quarter comp sales rose 6%, while Aerie Comp sales increased 13%. 

Quarterly adjusted gross profit of $626 million increased 23%. The adjusted gross margin rate of 37.3% rose 340 basis points. 

Margin expansion was driven by strong demand, lower product and transportation costs, and continued benefits from our profit improvement work, including lower markdowns and leverage on rent, distribution, warehousing, and delivery.

Total ending inventory increased 9% to $641 million, with units up 11%. The company said inventory levels are healthy and well-positioned to fuel growth initiatives.

Capital expenditures totaled $39 million in the fourth quarter and $174 million for the full-year. 

In the fourth quarter, the company recorded a $131 million impairment and restructuring charge, of which $119 million was non-cash. 

For fiscal 2024, management expects capital expenditures to approximate $200 million to $250 million.

As part of its profit improvement project, the company took a number of steps to streamline strategic priorities and strengthen the organization, including restructuring its international operations. These actions will result in approximately $20 million in annualized savings beginning in 2024.

Outlook: American Eagle Outfitters said it is structured to deliver mid-to-high teens annual operating income expansion on 3%-5% annual revenue growth over the next three years and an approximate 10% operating margin.

The company sees FY24 revenue growth of 2%-4%, with operating income of $445 million-$465 million.

For the first quarter, management expects operating income of $65 million-$70 million. This reflects revenue up mid-single digits, including an approximately one point favorable impact from the retail calendar shift.

Price Action: AEO shares are trading higher by 4.26% to $24.45 on the last check Thursday.

Photo via Wikimedia Commons