American Eagle Outfitters (AEO) is ramping up preparations for the upcoming holiday season, as the company experiences a significant increase in inventory levels. In order to overcome supply chain disruptions, AEO has invested more in air freight, allowing them to stock up ahead of the busy shopping period. These efforts come after the clothing retailer reported better-than-expected quarterly results.

The rising interest in streetwear, combined with the easing of COVID-19 restrictions and widespread vaccine availability, has led to a surge in shoppers visiting American Eagle Outfitters stores. However, congested ports and factory closures in Asia have caused empty shelves for many retailers.

Another major player in the clothing retail industry, Abercrombie & Fitch Co, also reported strong quarterly revenue, surpassing market expectations. However, Abercrombie’s inventory levels remained relatively flat compared to the previous year. As a result, Abercrombie’s shares experienced a significant decline of approximately 17%, marking their worst day in the past two and a half years. Conversely, American Eagle’s shares saw a 5% increase.

Both American Eagle and Abercrombie are bracing themselves for additional costs in the upcoming holiday quarter. Abercrombie is anticipating a hit of around $75 million due to higher freight rates, while American Eagle expects additional freight costs of $70 million to $80 million. Despite these challenges, American Eagle has taken steps to strengthen its logistics capabilities. Earlier this year, the company acquired AirTerra, and just recently, it agreed to acquire Quiet Logistics for $350 million.

Numerous other apparel sellers in the US have also reported an increase in inventory levels as they have chartered their own container ships and ordered products well in advance for the holiday season. American Eagle’s inventory at the end of the third quarter rose by an impressive 32% to $740 million. Chief Operating Officer Michael Rempell expressed confidence in the company’s inventory position, asserting that they are well-prepared to meet the demands of a strong holiday season.

In terms of financial performance, American Eagle’s net revenue for the third quarter experienced a 24% rise to $1.27 billion, surpassing estimates of $1.23 billion. This success was largely driven by the strong demand for American Eagle’s eponymous brand and Aerie brand. Additionally, the company exceeded profit estimates. Abercrombie also saw a boost in net sales, which increased by 10% to $905.2 million.

Overall, despite the challenges posed by supply chain disruptions, American Eagle Outfitters is gearing up for a successful holiday season. With increased investment in air freight and recent acquisitions in the logistics sector, the company is ensuring that their shelves remain stocked, providing customers with a positive shopping experience. Armed with strong quarterly results and an optimistic outlook for the holiday season, American Eagle Outfitters is well-positioned to capitalize on the heightened consumer spending during this festive period.

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