Apparel retailer American Eagle Outfitters (AEO) announced it plans to double its Aerie business to $2 billion in revenue by 2023, while looking to improve profit at its namesake American Eagle stores.
At a virtual investors meeting, AEO CFO Mike Mathias said the retailer is looking to close 200 to 250 locations, mostly mall-based, during the next two to three years. It currently holds about 880 American Eagle stores. It also plans to add around 50 Aerie stores to bring the total to around 400 at the end of 2021, and expects to have 500 to 600 Aerie stores in 2023.
AEO is targeting revenue of approximately $5.5 billion and operating income of $550 million for fiscal 2023, with the operating margin expanding to 10%. These targets exclude potential asset impairment and restructuring charges.
“2020 demonstrated the strength of our organization, our brands and our capabilities – and we are emerging with momentum,” said Jay Schottenstein, AEO’s executive chairman of the board and CEO. “As the pace of change and innovation accelerated over the past year, I believe the environment is ripe with potential, and I see more opportunity for AEO than ever before.”
The retailer’s stock was up more than 3% on the news, CNBC reported Thursday.
AEO expects fourth quarter 2020 revenue to decrease in the low single digits, due to store revenue declines from weak mall traffic, store closures and reduced hours related to the pandemic. Aerie’s fourth quarter revenue is expected to increase in the high-20% range. American Eagle is expected to decline in the low double-digit range, as a result of its higher store penetration.
However, the digital channel maintained strong momentum across both brands with double-digit growth expected.
“I’m extremely proud of our performance during the fourth quarter, which demonstrated strong growth to last year and continued quarterly sequential improvement,” said Schottenstein. “Compelling holiday product and marketing, combined with a disciplined approach to promotional activity drove very strong margin results. The team continues to instill strong inventory and expense management, and I believe we are well-positioned as we head into 2021.”