Why Are Investors Cheering for American Eagle Outfitters?
March 04, 2021 by InvestorDestination Team
Today despite the broad market decline, shares of American Eagle Outfitters Inc (NYSE: AEO) shot up 9%. Investors are cheering its fourth-quarter results.
In recent years as the mall traffic declined, the company strengthened its digital business. This helped the company serve its customers during COVD store closures.
Its overall digital revenue increased by 35% in the fourth quarter, with Aerie up 70% and its namesake brand American Eagle up 20%. The strength of its digital business and the Aerie brand's product offering has helped the company grow Aerie's revenue by 25% and comp sales by 29%. The company's overall gross margin expanded by 300 basis points due to higher full-priced sales and reduced promotions.
In recent years, retailers were reporting declining comp sales and margins and blaming declining store traffic. Now despite the traffic decline due to COVD, the company expanded margins and comp sales. No wonder investors are cheering its results.
As the country is getting ready to move towards a post COVD world, 2021 will be a better year for the retail industry.
Aerie brand's body positivity and inclusive messages are resonating with its customer base. Most probably, its momentum will continue. However, fashion is a cyclical business.
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