American Eagle Outfitters(AEO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue for Q3 2024 was $1.3 billion, down 1% year-over-year, impacted by a$ 45 million headwind related to the retail calendar [34] - Adjusted operating income was $124 million, at the high end of guidance, with an adjusted operating margin of 9.6%, flat compared to last year [35][41] - SG&A expenses decreased by 3% quarter-over-quarter, leveraging 50 basis points as a rate of sales [37][38] - Ending inventory cost was up 5% year-over-year, indicating healthy positioning for the holiday season [39] Business Line Data and Key Metrics Changes - American Eagle achieved a 3% comparable sales increase, marking its sixth consecutive quarter of growth [26] - Aerie recorded a 5% comp growth, building on a 12% growth last year, with expectations for continued revenue growth [21][22] - Aerie's apparel category saw its seventh consecutive quarter of double-digit growth, particularly in Soft Dressing and Activewear [22][23] Market Data and Key Metrics Changes - The company experienced positive momentum across brands and channels, despite some demand choppiness [8] - The retail calendar shift and adverse weather conditions impacted sales performance, particularly in September and October [68][95] - The strengthening US Dollar has created currency pressure, particularly affecting the business in Mexico [86][88] Company Strategy and Development Direction - The company is focused on its "powering profitable growth" strategy, aiming for long-term growth and operational efficiency [7][8] - Strategic initiatives include amplifying brand presence, optimizing operations, and executing with financial discipline [12][14] - The company plans to open 45 new Aerie stores next year, significantly increasing its footprint compared to only four openings this year [51][140] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding fourth-quarter demand outlook, adjusting guidance to reflect potential challenges [17][43] - Positive customer response was noted during key selling periods, including Thanksgiving and Black Friday, with record store performance [42][112] - The company remains optimistic about its strategic direction and the potential for growth across its brands [30][41] Other Important Information - The company ended the quarter with$ 160 million in cash and no debt, maintaining a strong balance sheet [15][40] - Capital expenditures for the third quarter totaled $60 million, with full-year spending expected to be between$ 225 million and $245 million [39] Q&A Session Summary Question: Can you speak to the progression of demand into the fourth quarter at Aerie? - Management noted that Aerie saw record revenues in Q3 and is cautiously optimistic about new categories like sleep and swim for future growth [50][51] Question: What are your expectations for promotions in the fourth quarter? - The company plans to maintain similar promotional levels to last year, with inventory well-positioned across brands and categories [58][59] Question: Can you elaborate on the choppiness in demand? - Management attributed the choppiness to weather conditions and the retail calendar shift, but noted strong performance during peak periods [68][95] Question: How is the Intimates business performing? - The Intimates category is down industry-wide, but the company is holding its share and seeing improvements in demand trends [102][104] Question: What is the impact of the new administration on tariffs? - The company has flexible sourcing capabilities and is prepared to adapt to any changes in tariff policies [148][149] Question: What are the plans for store openings next year? - The company plans to open approximately 45 new Aerie and OFFLINE stores, while American Eagle may see a net closure of around 20 stores [155][161]