(Filed Under Financial and General Interest News). Aerie brand comparable sales rose 17% for the quarter, and 23% for the full year ended January 28, 2017. Meanwhile, the lingerie division of American Eagle Outfitters (AEO) revealed plans to expand the Aerie brand from about 190 locations currently to 300 locations.
In the first phase of its expansion, Aerie reported it had opened 13 and closed eight stand alone shops in the last fiscal year, raising the total to 102 by the end of January. It stated it was expecting to open 15 more in fiscal 2017. Assuming no additional Aerie closings in 2017, the number of stand alone shops should rise to about 117 this year.
During fiscal 2016 Aerie also added 21 additional Aerie “side by side” shops (which are part of existing American Eagle stores and are not normally counted as separate stores), raising the total from 67 to 88. (70 of the shops are in the U.S. and nine each are in Canada and Mexico).
In the conference call with analysts to discuss the most recent financial results, Jen Foyle, Aerie global brand president, declared, referring to the 190 current Aerie locations: “We have seen the opportunity to expand that number to 300 plus stores over time.”
American Eagle as a whole, which operates a combined total of about 1050 apparel stores in all in North America, reported sales rose during fiscal 2016 to $3.610 billion, up from $3.522 billion in the year ended January 30, 2016. Net income from continuing operations slipped to $212.4 million from $213.3 the year before.
The recent addition of stand alone Aerie stores and “side by side” shops, represents a dramatic change in strategy for American Eagle. At the end of fiscal 2011 it was operating 158 stand alone Aerie shops before embarking on a series of steady closings which reduced the total to just 91 as of the end of the second quarter of 2016. It was compelled to reverse itself and start opening the new, smaller, redesigned Aerie stand alone shops because, as Jen Foyle noted in a different conference call at the end of 2015, the company, at some point, discovered “that 90% of our customers are acquired through brick and mortar stores.”
In addition to more stores, Aerie is looking to expand into new, untouched sections of the country. “We have recently expanded into new markets with openings in Denver and Hawaii. In addition, our temporary location in SoHo has been generating extremely positive results,” said Foyle. At the end of 2016 she had pointed out, the stand alone stores had been “highly focused and concentrated” in just 11 states.
In the recent conference call, Foyle boasted the latest quarter, “marked our 12th straight quarter of double-digit sales growth. We saw a particular strength on the digital business as our customers responded well to our dedicated online Aerie shop. I am also pleased that we continue to attract new Aerie customers, adding a double-digit increase to our customer file this quarter. By category, apparel performed well, highlighted by our sports and yoga inspired lines Chill. Play. Move., which launched earlier in the year. We are having a lot of fun with this collection incorporating novelty along with lounge, yoga and workout apparel”
Observers have attributed much of Aerie’s recent success to its strong position in bralettes. And many other retailers and wholesalers have responded by expanding in the sector. “Certainly, competition is getting fairly impressive in the bralette category,” Foyle noted, but continued, “we are pretty strategic on how we promote our business and we are building promotions to be competitive.” She also emphasized that the company also sells shoppers a wide variety of other intimates, “And the bralette business is really what adds a little fuel to the fire and excitement for the customer and we consider that our fashion business.”
During the call Foyle was asked about swim wear, a category that Victoria’s Secret recently chose to exit. “We are really excited about the swim wear business,” she replied. “And in fact, that business has been a growth category for us.” She added, “We have got pretty aggressive in that business prior to any competition exiting the business and on top of getting aggressive, we really” targeted one piece bathing suits and “we really went after that trend. And we have seen strong results in that category.”
She pointed to success with the recent launch of “Chill. Play. Move. That has been an outstanding launch for us. We launched back in September. And the innovation in that category has been phenomenal. “ — NM
A complete transcript of the most recent American Eagle conference call can be found here: http://seekingalpha.com/article/4051040-american-eagle-outfitters-aeo-ceo-jay-schottenstein-q4-2016-results-earnings-call-transcript?page=1
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