American Eagle Outfitters (AEO) 3rd quarter 2021 earnings report review
Category: American Eagle Outfitters (AEO)
Date: 30 November 2021 Stock Price: of AEO $26.93 Market Capital of American Eagle Outfitters: $4.54 billion We take a look at the 3rd quarter 2021 earnings report of American Eagle Outfitters, an on-trend clothing, accessories and personal care products company. The group reported revenues of $1.27 billion and net income of $58.1 million for the 3rd quarter of their 2021 fiscal year.
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- As strong demand for our merchandise and brands continues, I’m very pleased to report another quarter of record revenue and profit. . The power of our brands, operations and talent are clearly evident and we are intensely focused on ensuring these strengths continue to take AEO to new heights - Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer."
About American Eagle Outfitters
American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle Outfitters® and Aerie® brands. The company operates more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle Outfitters and Aerie merchandise also is available at more than 200 international locations operated by licensees in 25 countries
Overview of American Eagle Outfitters Q3 2021 earnings report
Third Quarter 2021 Highlights Compared to Third Quarter 2020
- Record revenue of $1.27 billion increased 24%
- Operating income of $210 million more than doubled, reaching a new third quarter high
- Strong demand, higher full-priced sales, reduced promotions and controlled costs fueled gross margin expansion to 44.3% and operating margin to 16.5%
- American Eagle net revenue rose 21% and operating income was up 68%
- Aerie net revenue increased 28% and operating income rose 46%
American Eagle Outfitters management commentary on their 3Q 2021 earnings report
PITTSBURGH--(BUSINESS WIRE)-- American Eagle Outfitters, Inc. (NYSE: AEO) today announced financial results for the third quarter ended October 30, 2021.
“As strong demand for our merchandise and brands continues, I’m very pleased to report another quarter of record revenue and profit. The work on our Real Power. Real Growth. value creation plan is driving meaningful improvements to our profitability through real estate and inventory optimization; omni-channel and customer focus; and our supply chain initiatives. The power of our brands, operations and talent are clearly evident and we are intensely focused on ensuring these strengths continue to take AEO to new heights,” said Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer.
“This quarter, we took an important next step in our supply chain transformation with the planned acquisition of Quiet Logistics to ensure ongoing efficiencies and procure a state-of-the-art logistics platform with meaningful growth potential. With our customer-first focus, the teams did a great job bringing in goods to meet strong demand this holiday season. I am extremely proud of the team’s ability to execute with precision at a time of volatility and am confident that we will exceed $600 million of operating income for the year, well above the $550 million 2023 target,” Jay continued.
“As strong demand for our merchandise and brands continues, I’m very pleased to report another quarter of record revenue and profit. The work on our Real Power. Real Growth. value creation plan is driving meaningful improvements to our profitability through real estate and inventory optimization; omni-channel and customer focus; and our supply chain initiatives. The power of our brands, operations and talent are clearly evident and we are intensely focused on ensuring these strengths continue to take AEO to new heights,” said Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer.
“This quarter, we took an important next step in our supply chain transformation with the planned acquisition of Quiet Logistics to ensure ongoing efficiencies and procure a state-of-the-art logistics platform with meaningful growth potential. With our customer-first focus, the teams did a great job bringing in goods to meet strong demand this holiday season. I am extremely proud of the team’s ability to execute with precision at a time of volatility and am confident that we will exceed $600 million of operating income for the year, well above the $550 million 2023 target,” Jay continued.
Inventory
Total consolidated ending inventory at cost increased 32% to $740 million compared to a 13% decline last year. The increase was partially driven by higher air freight due to global supply chain disruptions.
Capital Expenditures
In the third quarter of 2021, capital expenditures totaled $58 million, and year to date totaled $144 million. For fiscal 2021, the company now expects capital expenditures to be at the low end of our prior guidance range of $250 to $275 million.
Cash Flow and Balance Sheet
The company ended the period with total cash of $741 million. This compares to $692 million in third quarter 2020.
Shareholder Returns
The company’s third quarter cash dividend of $30 million was paid during the quarter.
Total consolidated ending inventory at cost increased 32% to $740 million compared to a 13% decline last year. The increase was partially driven by higher air freight due to global supply chain disruptions.
Capital Expenditures
In the third quarter of 2021, capital expenditures totaled $58 million, and year to date totaled $144 million. For fiscal 2021, the company now expects capital expenditures to be at the low end of our prior guidance range of $250 to $275 million.
Cash Flow and Balance Sheet
The company ended the period with total cash of $741 million. This compares to $692 million in third quarter 2020.
Shareholder Returns
The company’s third quarter cash dividend of $30 million was paid during the quarter.
American Eagle Outfitters (AEO) stock price chart over the last 5 years
The image below shows the stock price history of American Eagle Outfitters for the last 5 years. And its been a pretty decent time for AEO stockholders. Over the last 5 years the stock of American Eagle Outfitters provided a return of 78.3% to stockholders
The stock of American Eagle Outfitters (AEO) is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear indication that the short term momentum and sentiment of American Eagle Outfitters stock is negative at this point in time.
The stock of American Eagle Outfitters (AEO) is trading at a lot closer to its 52 week low than it is to its 52 week high which to us is a clear indication that the short term momentum and sentiment of American Eagle Outfitters stock is negative at this point in time.
American Eagle Outfitters (AEO) stock vs Buckle (BKE) stock over the last 5 years
The image below shows the stock price performance of American Eagle Outfitters (AEO) and Buckle (BKE) over the last 5 years. The trends of the two clothing firms are very similar, however the total stock price returns of these two firms are very different. The summary below shows the stock price returns of these firms over the last 5 years.
The stock of Buckle (BKE) has easily outperformed that of American Eagle Outfitters over the last 5 years.
- Buckle (BKE): 112.2%
- American Eagle Outfitters (AEO): 78.3%
The stock of Buckle (BKE) has easily outperformed that of American Eagle Outfitters over the last 5 years.
American Eagle Outfitters (AEO) latest stock valuation
So based on American Eagle Outfitters 3rd quarter 2021 earnings report what do we value the stock price at? Based on the group's latest earnings report our valuation model provides a target price (full value price) for American Eagle Outfitters at $29.10 a stock. We therefore believe American Eagle Outfitters stock is undervalued at its current price of $26.93
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $29.10 A good entry point into the stock of American Eagle Outfitters would therefore be at $26.20 or below.
Since the stock of American Eagle Outfitters is trading at close to our suggested entry point into the stock we rate the stock of American Eagle Outfitters as a hold.
We usually recommend that long term fundamental or value investors look to enter a stock at least 10% below our target price (full value price) which in this case is $29.10 A good entry point into the stock of American Eagle Outfitters would therefore be at $26.20 or below.
Since the stock of American Eagle Outfitters is trading at close to our suggested entry point into the stock we rate the stock of American Eagle Outfitters as a hold.
Next earnings release of American Eagle Outfitters
It is expected that American Eagle Outfitters (AEO) will release their 4th quarter 2021 earnings report in late February 2022