Dive Brief:
- American Eagle Outfitters took a $98.3-million hit in impairment and restructuring charges tied to Quiet Platforms as the retailer "refocused" the logistics business's operations, according to its Q4 earnings release.
- Quiet Platforms' third-party business component has not met American Eagle's expectations amid reduced e-commerce fulfillment demand, CFO Mike Mathias said on an earnings call Thursday. That spurred the retailer to have Quiet Platforms focus on its "core capabilities that serve our brands and our best customers."
- Quiet Platforms offers third-party fulfillment and delivery services that leverage 30-plus carrier partners. According to its website, Quiet Platforms has delivered more than 50 million parcels annually and achieved an on-time delivery rate in excess of 95%.
Quiet Platforms’ impairment and restructuring charges reported in Q4
| Charge | Reason |
|---|---|
| $40.5 million | Intangible asset impairment |
| $39.6 million | Goodwill impairment |
| $13.9 million | Long-term asset impairment, mainly related to technology that is no longer part of its long-term strategy |
| $4.3 million | Employee severance, based on American Eagle Outfitters’ revised strategy for Quiet Platforms |
Source: American Eagle Outfitters
Dive Insight:
The road for American Eagle to build an "anti-Amazon" has been bumpy since the retailer formed Quiet Platforms by combining Quiet Logistics and AirTerra, both of which it acquired in 2021.
Executives have touted the acquisitions as helping American Eagle lower delivery costs, trim excess store inventory and generate revenue from third-party customers using its logistics services.
“It’s going to give the ability for us and other retailers to be able to compete against the Amazons, the Targets and the Walmarts in the future," CEO Jay Schottenstein said in 2022.
But Quiet Platforms has had trouble growing its third-party logistics business to meet American Eagle's expectations. Last year, Quiet Platforms President and American Eagle Chief Supply Chain Officer Shekar Natarajan stepped down last year amid those struggles.
American Eagle's "Other" reporting segment, which includes Quiet Platforms, weighed on the company's Q4 financial results. The “Other” segment posted a $36.1 million operating loss for the year.
Adjusting Quiet Platforms' operations will better align it with American Eagle's long-term strategy while still leveraging its strengths "as a regionalized fulfillment center network," per Thursday's release. This network allows American Eagle to locate inventory closer to stores and customers, enabling faster delivery times and lower costs, Mathias said.
"In the last two years, we've lowered our cost per order by 8% relative to 2021, even as some of the industry's largest shipping companies have taken double-digit rate increases," Mathias said. "We've done this while speeding up our delivery times, with over 80% of orders now delivered in three business days or less."
