(Filed Under Financial and General Interest News). Aerie comparable store sales rose 19% in the third quarter, following a 21% increase in the same quarter last year. Year to date comps for the intimates division of parent company American Eagle Outfitters (AEO) are up 23%, following a 25% increase in the first nine months of 2016.
“We posted our 14th consecutive quarter of positive comps,” boasted Jen Foyle, Aerie’s global brand president. She added, speaking during the conference call to discuss the results, “We experienced sales growth in stores across all formats driven by traffic increases, and digital sales were extremely strong. We continue to build our customer file, adding 13% to our loyalty members in the third quarter.”
Meanwhile, for AEO as a whole, net income fell in the three months ended October 28, 2017 to $63.7 million on higher sales of $960.4 million, compared to earnings of $75.8 million on sales of $940.6 million in the same quarter in 2016. In addition to intimates, AEO sells a broad range of apparel for men and women.
In the conference call, CEO Jay Schottenstein noted, “Aerie has unique appeal in today’s marketplace and represents a significant growth opportunity. We’ve been thrilled with Aerie’s growing brand equity and our goal is to reach $1 billion over the next few years.”
Foyle added, “As our brand expands, new store growth and customer acquisition are major priorities. New stores drive digital sales in those markets. We recently opened up on Miami’s Lincoln Road with an updated store format where we took some of the best learnings and brand experiences from our Soho pop-up store. We tailored that store to the market with an expanded swimwear collection and we are very excited with the early success.”
A chart provided by the company noted that the net number of Aerie stand-alone stores has risen from 102 as of January 28, 2017 to 110 as of October 28. Meanwhile the number of Aerie “side by side” locations, which are inside larger American Eagle stores and are counted separately, has risen from 88 to 114 during the same period.
Encouraging information about the crossover between American Eagle (AE) apparel customers and Aerie intimates customers was provided by AE global brand president Chad Kessler. “It’s actually a fantastic growth opportunity for us because the number of Aerie customers who shop AE is a very high percent. The majority of Aerie customers shop AE, but the majority of AE women’s customers do not yet shop Aerie, so we’re putting in place some strategies with the marketing team and cross-pollination to encourage those AE women customers who are not yet shopping Aerie to become introduced to the brand and to shop Aerie.” There are currently 943 AE stores in all.
Foyle had noted some “softness” in bra sales during the last conference call in August, and said in the current call, “we saw some negative comp trends in August in bras, but we went after the Real Me bra in September, and from there on it was really interesting how the bra business turned around for us. The core bra business has really turned on for us,” she continued. “We’re excited about that and we’re definitely not taking our eyes off this business. This is where we build loyalty, and the team has worked fast and furiously around bra launches for 2018. We have a couple coming our way right now and they’re very, very exciting. I think the customer is going to love them, tried and true performance bras that we know are going to work for us in some of our key categories that we already have had success in. Then throughout the year, you’re going to see the focus is coming back to bras for us. We know our customer loves our bras and our fits, and we’re excited with what we see also in bralettes. Really interesting - in Q4, we’re really starting to see through the month of November nice comps in our right price business there, so there still is demand for bralettes. I think it got a little saturated out there, and we’re still going to keep that as a part of our business, and certainly we see the customer--you know, there is a demand there as well. So bras are at the forefront of everything we do, so we’re excited about what’s ahead.”
Foyle explained, “It’s extremely gratifying to see our customers responding to a broad range of merchandise that completes the Aerie lifestyle. In addition to strength in core intimates, including bras and undies, we saw strength in apparel, active wear and swim wear. Our active collection, Chill Play Move, is exceeding our expectations. New fabrics and fits have been very well received and go great with our new cozy fleece tops. To date, the holiday season has been terrific. We’ve had a very strong response to the holiday assortment and our gift items also across the board.”
An interesting note about the connection between brick and mortar stores and internet sales was provided during the call by CFO Robert Madore. “Aerie digital business is unbelievable. It’s almost 40% this quarter, and what we’ve seen is where we’ve opened an Aerie store--you know, we currently operate in about 17 states so there’s a lot of white space for additional brick and mortar stores, but what we’ve found is where we open a brick and mortar store, in the same kind of mile radius it tends to drive digital demand at 1.5 times the store’s sales, so it’s clearly a driver of digital sales and demand and performance. If you take that and look at all of the opportunities that we have to open additional brick and mortar stores, I think we’re going to continue to see really deep penetration in digital within the Aerie brand.” — NM
The complete conference call transcript can be found here: http://www.nasdaq.com/aspx/call-transcript.aspx?StoryId=4130141&Title=american-eagle-outfitters-aeo-ceo-jay-schottenstein-on-q3-2017-results-earnings-call-transcript
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