AEO

American Eagle tops estimates on robust apparel demand, fewer discounts

Credit: REUTERS/ERIN SCOTT

Updates shares, adds background throughout, analyst comment in paragraph 5

March 7 (Reuters) - American Eagle Outfitters AEO.N topped Wall Street estimates for the fourth quarter on Thursday, as consumers snapped up the retailer's full-price casual wear apparel during the crucial holiday shopping season in the United States.

Shares of the company rose 8% in early trade after it also forecast full-year revenue growth largely in line with analysts' expectations.

The company shared its long-term target of mid-to-high teens growth in annual operating income over the next three years.

The target banks on American Eagle's strategy to steer its brands, including Aerie and Offline, towards higher-margin products such as casual and athletic wear.

The company's focus towards tailoring its product assortment has helped it cut down on unnecessary markdowns and sets it apart from other retailers predicting softer spending ahead, said Rachel Wolff, analyst at Insider Intelligence.

Like peers, American Eagle has worked towards trimming inventory levels and introducing fresh styles to appeal to budget-conscious consumers, who are wary of non-essential purchases in a choppy macro environment.

Its revenue grew 12% to $1.68 billion for the fourth quarter, compared with LSEG estimates of an 11.3% growth to $1.66 billion.

American Eagle's results mirror that of peer Abercrombie & Fitch's ANF.N, which bet on full-price demand for its popular logo-less shirts to target upbeat annual revenue.

The Todd Snyder-parent expects annual revenue to rise between 2% and 4%, versus analysts' average estimate of a 2.9% growth.

For the quarter ended Feb. 3, the company's gross margin rate grew 340 basis points to 37.3%, on easing input and transportation costs as well as fewer discounts on its products.

Excluding items, American Eagle earned 61 cents per share for the fourth quarter, compared with expectations of 50 cents.

(Reporting by Juveria Tabassum; Editing by Shilpi Majumdar)

((Juveria.Tabassum@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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