American Eagle focused on Aerie growth; to close hundreds of stores in coming years

American Eagle Outfitters is focused on growing its Aerie banner as it plans for the future.

The teen apparel retailer on Thursday announced a long-term growth strategy that aims to double revenue for its Aerie intimates brand to $2 billion by 2023 while it also works to improve profit at its sagging namesake business.

At a virtual investors meeting, AEO CFO Mike Mathias said the company, which has about 880 namesake stores, is looking to shutter potentially 200 to 250 locations,  mostly mall-based, during the next two to three years.  At the same time, it plans to expand Aerie from about 350 stores to approximately 400 locations by the end of this year. It expects to have  500 to 600 Aerie stores in 2023.

AEO said it is targeting revenue of approximately $5.5 billion and operating income of $550 million in fiscal 2023, with the operating margin expanding to 10%. American Eagle revenue is expected to remain roughly flat to fiscal 2019, at approximately $3.5 billion, with improved profitability. In its latest reported fiscal year, it reported revenue of $4.31 billion.

Also on Thursday, AEO said that it expects fourth-quarter revenue to drop in the low-single digits due to store revenue declines from weak mall traffic, store closures and reduced hours amid the pandemic. 

The digital channel maintained strong momentum, with double-digit growth expected across brands. 

Sales at Aerie are expected to increase in the high-20% range, while sales at American Eagle are expected to fall in the low double-digit range. 

Compelling holiday product and marketing, combined with a disciplined approach to promotional activity drove very strong margin results,” CEO Jay Schottenstein said in a statement. “I believe we are well-positioned as we head into 2021.”