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: American Eagle sales could quadruple as denim trends turn to mom jeans and other loose-fitting styles

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American Eagle Outfitters Inc. is set to soar, according to UBS.

The apparel and accessories retailer reported first-quarter earnings and revenue that beat expectations, but there’s more growth yet to come, say company execs and analysts.

“The question investors are asking after another solid earnings report is if the thesis has played out. We think the answer is no,” wrote UBS analysts led by Jay Sole.

“We view American Eagle’s Aerie brand as softlines’ most underappreciated growth story. We think its sales will quadruple over the coming years from roughly $1 billion today.”

Sales for 2020 totaled $3.759 billion. For the first quarter, revenue totaled $1.035 billion.

The company will also benefit from a resurgence in denim, after a pandemic period in which comfy pants like sweats were in demand.

“By leading the body positivity movement, Aerie has stolen consumer mindshare from Victoria’s Secret and positioned itself for major share gains,” UBS said.

See: L Brands to separate and spin off Victoria’s Secret and Bath & Body Works

UBS rates American Eagle
AEO,
+2.27%

stock buy with a $49 price target.

American Eagle began to see a shift in denim styles back in September, heading toward a looser fit, said Jennifer Foyle, the global president for the Aerie brand, on the earnings call.

Mom jeans, which were the top seller for spring, and flare styles have gained popularity, according to American Eagle spokespeople.

The near-term also looks promising for other reasons.

“Everything we’re seeing on paper is telling us that back-to-school should be great and there will still be some tailwinds there with the new incentives for customer spend,”  Foyle said on the call, according to FactSet.

Also: Gap partners with Walmart to launch its first home collection

The company is also seeing growth in the new athleisure Offline brand, which is under the Aerie umbrella. The company now has five Offline stores operating. The company is aiming for more than 30 additional Offline stores this year.

“We think Offline has the potential to be like another Aerie,” said Jay Schottenstein, chief executive of American Eagle, on the earnings call, according to the FactSet transcript.

“I mean, this is probably the greatest time in this company’s history.”

UBS analysts say Aerie could become a $2 billion brand. Aerie revenue rose 89% in the first quarter, reaching $297 million. American Eagle revenue totaled $728 million.

American Eagle stock has skyrocketed 79.2% for the year to date. The SPDR S&P Retail ETF
XRT,
+0.95%

has rallied 47%. And the benchmark S&P 500 index
SPX,
+0.12%

is up 11.8% for the period.

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