In an effort to gain more control over its supply chain, American Eagle Outfitters AEO announced Tuesday it had acquired one of its logistics partners, Quiet Logistics, for $350 million in cash.
Known for its 2015 spun-off company Locus Robotics, Quiet Logistics uses its large network of technology-driven fulfillment centers in Boston, Chicago, Los Angeles, Dallas, St. Louis, and Jacksonville, Florida, to innovate more than 50 large direct-to-consumer brands by bringing their fulfillment centers closer to end consumers.
Bringing AEO's supply chain closer to its customers has enabled the retailer to improve its product ordering process, reducing inventory by 40% in its fiscal second quarter compared to Q2 2019, executives said.
During AEO's fiscal Q2 earnings call in September, Michael Rempell, executive vice president and chief operations officer, explained that investments in the total supply chain were the reason for the quarterly record revenue of $1.19 billion, a 35% increase compared to the second quarter of 2020.
"We are delivering products to customers faster, and despite industrywide cost increases, our delivery expense is leveraged as a percent of sales. Needless to say, I believe our supply chain platform truly is a competitive advantage. The investments we've made to date are paying off. As global supply chains continue to be disrupted, this is creating opportunities for us to become even faster, more agile, and more efficient," said Rempell.
He said the acquisition of logistics provider AirTerra in August enabled AEO's logistics team to leverage AirTerra's expertise and improve customer experience.
Related: AEO's acquisition of AirTerra melds separate parcel delivery visions
"Supply chain transformation has been a huge focus for us and we're very focused on controlling everything that we can," Rempell said, adding that the AirTerra acquisition "completely fits our strategy of leveraging scale and innovation to help us manage costs and improve service."
Under the terms of the latest acquisition, Quiet Logistics will continue to support other brands and retailers in addition to handling AEO's orders, similar to the company's agreement with AirTerra.
"We continue to be extremely pleased with the pace of our business and are executing well against our ‘Real Power. Real Growth.' plan. An important pillar of our strategy is transforming our supply chain to create greater agility, speed, and diversification. Our vision is to create an on-demand, hyper scaled operations platform that enables brand success," said Jay Schottenstein, AEO's executive chairman and chief executive officer, in Tuesday's announcement.
According to Quiet Logistics, the company's revenue has quadrupled over the past three years and is forecast to reach about $135 million at the end of its financial year in March.
"Quiet Logistics has provided significant benefits to AEO over the past year and we are leveraging our healthy cash position to ensure ongoing advantages. Also, as we continue to expand these services to other brands and retailers, we believe the business will scale, generating incremental value for our shareholders," Schottenstein said.
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