American Eagle is planning to turn around its business by reducing the footprint of its stores in mall locations and focussing on building its Aerie brand into a $2 billion business.
The company plans to shutter 200 to 250 mall-based stores over the next two to three years and increase the number of store locations of Aerie, its intimate apparel brand, by 50. The company’s goal is to have nearly 400 Aerie store locations by the end of this year and 500 to 600 stores by 2023, American Eagle’s Chief Financial Officer Mike Mathias said during an investor call.
“It’s a tale of two brands,” Mathias said.
American Eagle’s stock was up more than 3 percent this morning.
The company expects Q4 revenue to decrease in single digits as fewer customers frequent its brick and mortar stores at mall locations but remain bullish on drawing sales through digital channels. Mathias noted that digital sales of all of its brands were growing by double digits, which will continue to boost its revenue. American Eagle’s fast-growing intimate brand Aerie, for one, is projected to increase its Q4 revenue in the high 20 percent range. That being said, the namesake American Eagle brand is forecasted to see a double-digit decline in sales, CNBC reported.
Looking ahead, the company is reportedly planning to put more focus on Aerie, which it hopes to turn into a $2 billion business in the long term.
“Aerie has been posting among the best growth in retail, and therefore $2 billion seems a reasonable target to present,” BMO Capital Markets senior analyst Simeon Siegel said. “But it also seems fair investors may have been looking for more.”