American Eagle sees holiday-quarter sales dropping amid weak mall

American Eagle ahead of a virtual meeting with investors Thursday said it expects fourth-quarter revenue to decrease in the low-single digits, driven by a drop in brick-and-mortar store sales due to weak mall traffic during the Covid pandemic.

The apparel retailer said it expects momentum to continue online, with digital sales at both of its brands growing double digits. Its lingerie brand for teens, Aerie, is forecast to grow fourth-quarter revenue in the high-20% range, the company said, while its namesake American Eagle brand is forecast to see sales drop in the low double-digit range.

American Eagle shares were falling more than 3% in premarket trading. The stock is up about 54% over the past 12 months.

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

The retailer is expected to report its fourth-quarter and fiscal 2020 results on March 3.

In a separate press release Thursday, American Eagle laid out longer-term financial targets, aiming to grow its Aerie business to $2 billion, while it works on improving profits at its namesake banner.

“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 in an interview. “But it also seems fair investors may have been looking for more.”

The rapid growth of the Aerie brand, which sells everything from bras and underwear to swimsuits and sweatpants, is making it a much stronger competitor to L Brands‘ Victoria’s Secret business, he added.

Overall, American Eagle said it is targeting revenue of $5.5 billion, and operating income of $550 million, in fiscal 2023.

Read the press releases here.

This story is developing. Please check back for updates.