wdstock American Eagle Outfitters, Inc. ( NYSE: AEO ) is an American fashion retailer. The company owns the namesake brand (teenager to young adult basics), along with Aerie (women's intimates) and OFFLINE (women's athleisure).
This article covers AEO's 1Q24 results and the earnings call . Overall, I think the results were good. The company missed revenues by $10 million, though it delivered 4% top-line growth (6% comparable).
On the income side, it beat EPS by $0.06, with adjusted operating income growing about 75% (when adjusting for impairments in 1Q23). This is also the first time I have covered AEO.
I believe the business has some positive characteristics, like low leverage and what seems to be a good merchandise and pricing strategy. However, I do not like that it is leaning so much into women's athleisure, and I believe that the fashion retailing category, particularly in teenagers and young adults, is generally volatile and difficult to compete in. Today, AEO trades at about a market cap of $4.
6 billion (at a share price of $23). Considering its net cash balances, this represents an EV of about $4.3 billion.
The company's management has guided operating income for the year of $455 million, which, after adjusting for taxes, results in NOPAT of $332 million. This represents an EV/NOPAT multiple of 13x. I believe this multiple is fair, considering that AEO is growing and delivering on expense leveraging, and that the multiple is better than that of peers.
On the other ha.