The coronavirus pandemic has ushered in a new wave of consumer shopping patterns, with online retailing becoming one of the hottest trends at the moment. With consumers’ continued consciousness about health and safety, the current online boom is here to stay. American Eagle Outfitters (NYSE:AEO), Inc. AEO is one of the many retailers eyeing further digital acceleration in the near term as digital demand remains strong and above pre-pandemic levels.
Notably, the company delivered strong consolidated digital sales growth of 29%, accounting for 37% of total revenues in third-quarter fiscal 2020. Moreover, it witnessed online growth in Aerie and AE brands to the tune of 83% and 11%, respectively. Also, digital channel customer acquisitions jumped 37% in the said quarter.
Management recently introduced the same-day delivery option for online orders and enhanced its website in a bid to improve the page load speed. Apart from these, its four new distribution hubs are likely to help meet consumers growing online demand. These initiatives are likely to help in capitalizing the online shopping trend, which is expected to stay.
Other retailers benefiting from this COVID-led online trend include Nordstrom (NYSE:JWN) JWN, PVH Corp (NYSE:PVH). PVH and DICK'S Sporting Goods DKS. While PVH Corp.’s sales declined 18% in third-quarter fiscal 2020, digital sales grew 36% year over year. Further, e-commerce sales for Nordstrom grew 37% in third-quarter fiscal 2020, representing 54% of overall sales. Also, e-commerce sales for DICK'S Sporting’s skyrocketed 95% year over year in third-quarter fiscal 2020.
Coming back to American Eagle, continued strength in its Aerie brand remains a growth driver. Notably, fiscal third-quarter sales rose 34% for Aerie, marking the 24th successive quarter of double-digit growth for the Aerie brand. Further, Aerie’s customer acquisitions across all channels increased in double-digits, reflecting growth of 15%, with 62% growthin the online platform. Meanwhile, the AE brand also witnessed strong digital demand and gained in key categories such as jeans and bottoms. Encouragingly, it launched a new activewear collection, namely OFFLINE, with the first store receiving positive customer response. Such upsides are likely to enable the brand to reach the next milestone of $1 billion in sales.
However, it is grappling with soft mall traffic stemming from the COVID-19 situation. This led to sluggish store revenues to the tune of 16% in the fiscal third quarter. Further, the company is incurring extra expenses related to performance-based incentive compensation.
Markedly, this Zacks Rank #3 (Hold) stock has gained 31.4% year to date compared with the industry’s growth of 33.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Moreover, the Zacks Consensus Estimate for earnings in fiscal 2021 is pegged at $1.24 indicating a rise of 3.3%, in the past 30 days, which is likely to raise optimism for the stock.
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