(Filed Under wholesale Lingerie News). Sales at aerie were up 12% for the quarter ended May 2, 2015, but parent company American Eagle Outfitters revealed that it may now close as many as 25 of its lingerie stores this year, instead of the approximately 20 it said it would close during an analyst conference call in March.
The aerie brand continues to do better than the combined results for its parent, which were up 7% for the quarter, as well as the women’s apparel portion of its business, which was up 10% and the men’s apparel portion, which was up 2%. aerie targets younger women and, with at least one bra segment, girls from as young as 11.
American Eagle, as a whole, reported net income of $29,055,000 on sales of $699,520,00 for the quarter, compared with net income of $3,866,000 on sales of $646,129,000 for the three months ended May 3, 2014.
Since the start of February, American Eagle has already closed three aerie stores, bringing the total down to 98. During the entire fiscal year, it now says it plans to close “20-25” aerie stores, which presumable could drop to total to as low as 76. At the end of fiscal 2011 the company operated 158 aerie stores, but closed seven in 2012, 29 in 2013 and 21 in fiscal 2014.
Interestingly, American Eagle has, in the three months since January, also opened two additional “aerie Side by Side stores,” one in the U.S. and one in Canada. In its current investor presentation documents, the company explained these stores “are NOT counted as a separate store as they are part of AE Mainline or Factory stores.” As of the start of May there are 47 of the aerie Side by Side stores in the U.S., six in Canada and four in Mexico.
While there has been a dramatic reduction in the overall number of aerie stores, the brand is also committed to exploring new formats. In the conference call with analysts to discuss the first quarter results, Jen Foyle, aerie’s global brand president, stated, “We are really excited about what we are seeing on smaller formats, so the side-by-side locations where we are really leveraging AE, so nice momentum there and we love the new store concept. The team did an amazing job, really upping the ante on all the visuals and just the customer experience has been very well received. That said, we are going to test and scale a smaller standalone box and we are going to see what it does. We love what we are seeing again on the side-by-side locations, so this will be a test and scale, and we will go from there.”
At another point in the call she added, “we are also seeing good improvements from our store repositioning efforts. We have been closing on productive standalone stores and relocating close to 80 stores. Essentially, we have seen higher sales, productivity and profitability. Our new format stores, which are brighter, more open, modern and easier to shop, are performing very well.”
Not only did sales increase for aerie in the most recent quarter, but Foyle explained, “Like AE, our average unit retails increased and markdowns declined. aerie’s traffic was nicely positive as we made good progress gaining new customers.”
Recently, swimwear has been a particular strong vehicle for aerie. “Swim has grown nearly 20% of sales in a short period of time and is now a core aerie category,” revealed Foyle. “We see tremendous opportunity for further product extensions, particularly within our digital business.” Elsewhere in the conference call she added, “So what we have done in swim, you will see coming up in the future. And soft dressing is a big win for us and we will continue to address that whole casual lifestyle with the girls doing today.”
Foyle attributed some of the positive results for aerie to the advertising campaign it kicked off in the beginning of 2014, which emphasized that it would no longer be retouching the images of its models. “Brand marketing such as aerie Real in our selfie beach party this spring have begun to distinguish our brand and create positive buzz. Most customer outreach and engagement is a major, major priority as we move the brand forward.”
The executive added, “We continue to explore ideas like our collaboration with Yellowberry to create excitement and to broaden the scope of our customer base.” aerie for Yellowberry is the company’s “bra collection for girls 11 to 15” that it added, in collaboration with a teen designer, Megan Grassell earlier this year (BODY 3.26.2015). Grassell created her collection in 2013 to provide appropriate bras for younger girls. She offers U.S. made bras on her own website that retail for between $29.95 to $42.95. aerie for Yellowberry’s imported versions retail for $29.95 to 34.95.
During the current fiscal year the parent company plans to close 45 to 50 American Eagle stores. According to the firm, in addition to its company-owned stores, “American Eagle Outfitters and aerie merchandise also is available at 111 international stores operated by licensees in 17 countries.”
Even though lingerie has recently been doing better than its women’s and men’s apparel, American Eagle noted in its 2014 annual report that aerie represents a declining proportion of the company’s overall business, at least looking back over the past couple of years. Intimates represented only approximately 8% of its volume as of January 31, 2015, down from about 9% as of February 2, 2013.
Perhaps we will see a move in the other direction by the end of 2015.
The American Eagle conference call transcript by Seeking Alpha can be read in full here: http://seekingalpha.com/article/3200326-american-eagle-outfitters-aeo-ceo-jay-schottenstein-discusses-q1-2015-results-earnings-call-transcript?page=1
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