American Eagle Beats on Q3 Earnings, Stock Falls on Weak Holiday View

American Eagle Outfitters, Inc. AEO reported third-quarter fiscal 2024 results, wherein earnings beat the Zacks Consensus Estimate while revenues lagged the same. Both the bottom and top lines declined year over year.American Eagle Outfitters, Inc. Price, Consensus and EPS Surprise American Eagle Outfitters, Inc. price-consensus-eps-surprise-chart | American Eagle Outfitters, Inc. QuoteThe company’s earnings beat demonstrated effective progress on its Powering Profitable Growth strategy. A strong back-to-school season helped achieve robust comparable sales (comps) growth across brands and channels and aided adjusted operating income at the high end of its guidance.AEO’s adjusted earnings of 48 cents per share declined 2% compared with 49 cents earned in the year-ago quarter. However, the bottom line surpassed the Zacks Consensus Estimate of 46 cents per quarter.American Eagle's shares dropped nearly 13% in the after-hours trading session, following its third-quarter fiscal 2024 earnings release, where it issued a weak holiday guidance and lowered its fiscal 2024 forecast. Shares of the Zacks Rank #4 (Sell) company have lost 4.7% in the past six months against the industry’s growth of 5.4%.Image Source: Zacks Investment ResearchStay up-to-date with all quarterly releases: See Zacks Earnings Calendar.AEO’s Quarterly RevenuesNet revenues of $1.29 billion fell 1% year over year and also missed the Zacks Consensus Estimate of $1.31 billion. The decrease can be primarily attributed to a $45 million headwind tied to the retail calendar shift. Consolidated comps improved 3% compared with 5% growth registered in the year-ago quarter.Brand-wise, revenues declined 3% year over year to $832 million at the American Eagle brand. However, comps for the brand rose 3%.Revenues jumped 4.4% year over year to $410.4 million for the Aerie brand. However, comps for the brand were up 5%. Sturdy demand for its core apparel and strength in the Soft Dressing and OFFLINE Activewear brands aided growth.An Insight Into AEO’s Margins & ExpensesGross profit decreased 3% year over year to $527 million. The gross margin contracted 90 basis points (bps) to 40.9%. The decrease was driven by higher markdowns and expense deleverage stemming from the retail calendar shift.Selling, general, and administrative (SG&A) expenses fell 3% year over year to $351 million. As a percentage of sales, SG&A expenses decreased 50 bps to 27.3%. The decline in SG&A expenses was driven by lower compensation costs, including incentive pay, with reduced professional fees, services and maintenance costs. This was partly negated by elevated advertising expenses.Adjusted operating income of $124 million was down 1.4% from the year-ago quarter, driven by the impact of the retail calendar shift to the tune of around $20 million. The adjusted operating margin of 9.6% was flat year over year.AEO’s Financial Health SnapshotAmerican Eagle ended the fiscal third quarter with cash and cash equivalents of $160.2 million, with no outstanding debt. Total shareholders’ equity as of Nov. 2, 2024, was $1.75 billion. Inventory rose 5% year over year to $804 million at the end of the reported quarter.Capital expenditure was $61 million in the fiscal third quarter. The company expects capital expenditure of $225-$245 million for fiscal 2024.In the fiscal third quarter, the company returned $24 million to its shareholders through dividends and share repurchases. In the first half of fiscal 2024, the company bought back 6 million shares for $131 million. Additionally, it paid out a quarterly dividend of 12.5 cents per share, reflecting a total dividend payout of $73 million in the year-to-date period. As of Nov. 2, 2024, the company had 24 million shares remaining under its current share repurchase authorization.What to Expect From AEO in Q4 & FY24?For the fourth quarter of fiscal 2024, American Eagle expects comps growth of 1%. Total revenues are estimated to decline 4% in the fiscal fourth quarter, including an impact of $85 million from the combination of the retail calendar shift and one less selling week. AEO anticipates operating income of $125-$130 million for the fiscal fourth quarter, representing currency pressure from the recent strengthening in the U.S. dollar, along with a $20 million drag from the retail calendar shift. SG&A is likely to leverage, owing to the efficiencies in key focus areas.For fiscal 2024, the company expects comps to improve 3%. Total revenues are expected to increase 1%, including the impact of one less selling week. Management expects adjusted operating income of $428-$433 million in fiscal 2024 compared with $375 million in fiscal 2023, suggesting a mid-teens improvement year over year.Three Picks You Can't MissWe have highlighted three better-ranked stocks in the broader sector, namely Deckers DECK, The Gap, Inc. GAP and Abercrombie & Fitch Co. ANF.Deckers, a footwear and accessories dealer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.DECK delivered an average earnings surprise of 41.1% for the trailing four quarters. The Zacks Consensus Estimate for Deckers’ fiscal 2024 sales and earnings indicates growth of 13.6% and 12.8%, respectively, from the year-ago reported figures.Gap, a retail company, offers apparel, accessories and personal care products for men, women and children. It currently carries a Zacks Rank #1.The Zacks Consensus Estimate for Gap’s fiscal 2024 sales and earnings indicates growth of 0.7% and 39.9%, respectively, from the year-ago quarter’s reported numbers. GAP has a trailing four-quarter earnings surprise of 101.2%, on average.Abercrombie, a leading casual apparel retailer, currently has a Zacks Rank of 1. Abercrombie has a trailing four-quarter earnings surprise of 14.8%, on average.The Zacks Consensus Estimate for ANF’s fiscal 2024 sales and earnings indicates growth of 14.9% and 67.5%, respectively, from the year-ago reported figures.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Abercrombie & Fitch Company (ANF): Free Stock Analysis Report American Eagle Outfitters, Inc. (AEO): Free Stock Analysis Report Deckers Outdoor Corporation (DECK): Free Stock Analysis Report The Gap, Inc. (GAP): Free Stock Analysis ReportTo read this article on Zacks.com click here.Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks