Consumers are ready to shop, and pent-up demand for apparel such as core denim and intimates has American Eagle Outfitters Inc. updating first quarter expectations to over $1 billion in sales.
The teen retailer on Wednesday said “business is exceeding expectations” for the first quarter.
“Demand has accelerated across the American Eagle and Aerie brands, generating strong margins, higher full-priced selling and reduced promotions,” the company said. Operating income is forecasted at $120 million. That figure compares with first quarter 2019 operating income of $48 million, and adjusted operating income of $49 million.
“In light of the current environment, it’s truly gratifying to see consumer optimism, strong demand across channels and loyalty for our brands continue. I’m amazed by the incredible momentum of Aerie, which is consistently reaching new heights and exceeding our expectations. We are seeing great progress at American Eagle, with stronger merchandise, marketing and inventory management clearly demonstrating the power and true potential of our leading brand,” Jay Schottenstein, American Eagle’s chairman and CEO, said.
The company has been focused on its “Real Power. Real Growth.” strategy, aimed at fueling the brand’s connection with customers, old and new, across its multi-channel platform. “External factors, such as economic stimulus, renewed consumer optimism and pent-up demand are also positively contributing to business performance,” it added.
Retail analyst Simeon Siegel has a “Market Perform” rating on shares of American Eagle. Shares of American Eagle closed at $32.98, up 1.4 percent, at the end of Wednesday’s trading session, and rose 5.3 percent to $34.73 in after hours trading. Siegel raised his price target to $36.00. American Eagle released its first quarter update after the markets closed on Wednesday.
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“As we have been discussing, tighter industry inventory, coupled with stronger consumer demand, bolstered by stimulus is presenting a trifecta yielding a surge in spending power at a time when demand is already outstripping supply. We expect these benefits to carry forward into [the second quarter] for American Eagle Outfitters and others that have situated themselves to benefit from higher AURs (average unit retail) and lower inventory,” Siegel said.
The analyst said he noticed an uptick in sales starting in mid-March, around the time when federal government’s stimulus checks were sent out, combined with warmer weather and increased demand from reopenings. “We expect these benefits to continue, suggesting ongoing upside to numbers rolling forward, continuing to position American Eagle Outfitters well for the reopening dynamics,” Siegel said.