American retailer AEO posts operating profit of $118 mn in Q3 FY22

AEO’s total net revenue was $1.2 billion in Q3 FY22, down 3 per cent compared to the third quarter of fiscal 2021. Brand revenue declined 5 per cent, which is better than the company’s expectation for a high single digit decline, AEO said in a press release.

In Q3 FY22, American Eagle revenue was $838 million, down 11 per cent, versus third quarter 2021, reflecting a negative 1 per cent 3-year revenue compound annual growth rate (CAGR). Comp sales in Q3 FY22 declined 10 per cent versus third quarter of fiscal 2021.

The company’s consolidated store revenue declined 4 per cent in Q3 FY22, compared to the corresponding period of the previous fiscal. Total digital revenue declined 5 per cent in Q3 FY22 compared to Q3 FY21.

AEO’s Q3 FY22 gross profit was $480 million, compared to $565 million in the third quarter of 2021, and reflected a gross margin rate of 38.7 per cent compared to 44.3 per cent last year. Higher markdowns and increased product costs drove approximately 400 basis points of the rate decline.

The company’s selling, general, and administrative expense in Q3 FY22 was $311 million, decreased 1 per cent due to lower incentive compensation, compared to Q3 FY21. AEO’s GAAP diluted EPS in Q3 FY22 was $0.42 compared to $0.74 in Q3 FY21.

AEO’s total ending inventory at cost increased 8 per cent to $798 million compared to $740 million last year. This reflects a meaningful improvement from last quarter’s increase of 36 per cent, reflecting actions to bring receipts more in line with demand.

For the fourth quarter of fiscal 2022, AEO is guiding brand revenue down in the mid-single digits and expects brand comps to be consistent with the third quarter. The company is also guiding fourth quarter gross margin in the range of 32–33 per cent, at the higher end of previous guidance.

Fibre2Fashion News Desk (DP)