American Eagle Outfitters (AEO) announced this week it is raising its 2023 financial targets following a successful holiday season.
The company, which owns teen retailer American Eagle and intimate apparel label Aerie, stated it’s on track to earn $600 million in operating income in 2021, surpassing its 2023 goal of $550 million two years ahead of schedule. The new goals for 2023 include an operating income of $800 million and revenue of $5.8 billion, up from $5.5 billion. Operating margin goals will raise from 10 percent to 13.5 percent.
The new targets are a direct reflection of a holiday season that surpassed pre-pandemic levels for many in the retail industry. According to a recent holiday spending report from Mastercard, holiday retail sales in the U.S. increased about 11 percent compared to the 2019 holiday season.
AEO’s “Real Power. Real Growth.” plan was a major driver of its success. The company launched the initiative in January 2021 as a way to double revenue for its Aerie brand and “reignite” its American Eagle label for significant profit growth. The plan focused on enhancing the brands’ connection with customers across its multichannel platform.
“I am extremely proud of the team’s outstanding execution throughout the past year, which has instilled real structural improvements within our company,” said Jay Schottenstein, AEO’s executive chairman of the board and CEO. “As I look forward, I see tremendous growth potential and opportunities across the organization. I am excited to see us build on our successes as we strive to reach greater heights and create lasting value for our shareholders.”
Fueling this growth were strategies related to inventory and real-estate optimization. In January 2021, AEO stated that it would shutter between 200 to 225 mall-based American Eagle stores and open 50 new Aerie stores, bringing its total intimates-focused stores to nearly 400 locations in 2021. In 2023, the company aims to bring that number to between 500 and 600.
Product improvements and strong demand were other contributing factors to the company’s success. In September 2021, AEO launched AE77, a premium denim range focused on lowering the company’s environmental impact through more sustainable techniques and machinery. The denim boom fueled by new fashion trends also helped give the American Eagle brand a boost in relevance.
And while the global supply chain experienced pandemic-related disruptions, AEO acted quickly to mitigate their effect on logistics.
“We closed out a milestone year for our supply chain, anchored by two key acquisitions, which secured cost efficiencies, locked in key strategic advantages and created a new platform for future growth,” said Schottenstein.
At the end of last year, AEO acquired AirTerra, a Seattle logistics startup founded by Nordstrom’s former supply chain chief, and Quiet Logistics, a firm which uses state-of-the-art technology and robotics to manage order fulfillment for consumer brands like M.Gemi, Outdoor Voices and Bonobos. The acquisitions help fulfill Schottenstein’s vision to “create an on-demand, hyper-scaled operations platform that enables brand success” and further help the company meet its new financial targets.