(Filed Under wholesale Lingerie News). Aerie comparable sales jumped an astonishing 38% in its first fiscal quarter of 2018. The event was even more remarkable since the comps, for the lingerie division of American Eagle Outfitters (AEO), were up 25% in the same quarter last year.
“This marked our 14th consecutive quarter of double-digit sales growth and Aerie is simply on fire,” declared Jen Foyle, global brand president of the division, during the conference call with analysts to discuss the results. Added AEO’s CEO Jay Schottenstein, “we’re still in the very early stages of growth. We know we have something really special here and we will continue to fuel Aerie’s growth to $1 billion and way beyond that.”
The optimism about Aerie’s expansion possibilities is party based on the fact it has stores in only 15 states, according to Foyle, who revealed, “we are on track to open a total of 35 stores to 40 stores this year.” Most of those will apparently be “side-by-side” locations (which are next to existing AEO shops). Currently there are “118 Aerie side-by-side locations,” and “109 Aerie stand-alone stores,” according to the company, and its guidance calls for the opening of 10 to 15 new, but the closing of five to 10 older Aerie stand-alone stores in 2018.
“During the first quarter, I was very pleased to see consistent performance and broad-based strength across” all formats, Foyle continued. “In fact, this was the second quarter in a row in which both stand-alone and side-by-side store formats posted over 20% comp growth. Aerie’s online business is simply spectacular, producing a nearly 50% sales gain in the quarter. All areas of the business are growing. We posted record sales volumes in a number of categories including core bras, undies, apparel, and swim in the first quarter.”
“In the first quarter, once again, we registered double-digit increase in our customer file. And over the past year, we have added over 3.5 million new customers. Not only are we acquiring customers at a steady pace, but we are also improving our customer retention rates.”
Foyle explained the growth: “performance was led by continued newness across all categories and the team’s focus on building outfitting and all around the area lifestyle. Our customers appreciate the collection’s foundation of cozy, casual, comfortable, and active, while also focusing on body positivity and inclusions. We build merchandise assortments for a diverse body type. This is at the very core of our DNA and really loved by our customers. Our brand awareness continues to expand with more impressions and social media followers. #aeriereal is very powerful and a movement, and we are reaching new customers every day.”
Looking ahead, “accelerating Aerie is a key growth initiative within the AEO strategic plan,” she stated in the call. “Clearly, we are delivering on that goal. And we are at the very early stages of this amazing growth opportunity. In addition to new product launches and strong customer engagement, we are expanding into new markets in North America. Additionally, we are improving on our existing market presence within a number of renovations into our new store design.”
“We are thrilled with the initial performance and customer feedback on this new design. Recent openings on 58 Lexington in New York City and in new malls in Raleigh and Nashville, they are definitely exceeding expectations. We’re looking forward to our continued expansion plans, which also includes our new SoHo store on Spring Street opening in July. Not only are these stores driving strong initial in-store selling, they are also elevating the performance of our online results within the markets.”
Asked about swim as opposed to other categories at Aerie, Foyle replied, “we have so much growth opportunity in all of our categories, including apparel, which is our Chill Play Move category, leggings and sweats. Everything is just really outperforming, including swim. It was a tough business seasonally, but I will say swim still really performed for the business.”
She added, “intimates has been holding on as well,” explaining, “we’re repositioning bras and there is more to come in Q3 and Q4, and we feel really excited about what we are about to present down the road, as far as the product and the innovation. But we’re seeing some nice build momentums in core bras and undies have been simply doing great.” She concluded, “we continually want to dress her from head to toe, which is why we have also gone after the apparel side of the business.”
A particular area of optimism at AEO is the hope that introducing current American Eagle customers to Aerie will lead to more underwear sales. Three months ago, during the last conference call, Foyle said a “strategic focus in 2018” will be to get more American Eagle apparel shoppers to buy Aerie lingerie. “Today, only 50% of women who shop our AE brand shop Aerie. This represents a tremendous opportunity to introduce new customers to the Aerie brand.”
During the latest call she said of Aerie, “the majority of our customers haven’t even seen what we have to offer in this brand, and we really need to get our brand out there and really show these customers and show the world what we have to offer in all these categories. We are lifestyle brands and we’re proud of that.” She added,
“from a margin perspective, Aerie is accretive to the company.”
Several years ago Aerie emphasized that it was no longer photo retouching its promotional images, and was going to include a wider range of body types in all of its endeavors. With many other companies now attempting the same approach, Foyle declared, “I just wanted to say, we started it years ago, and it is nice to see competition following. But it keeps up us ahead of our game. This platform Aerie Real is just so powerful for the brand and, like I said, it keeps us in the forefront, and we’re going to continue to surprise these customers with realness and product categories.”
Including Aerie, AEO as a whole “operates more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong,” selling under brand names that include American Eagle, Todd Snyder and Tailgate Clothing Co., according to the firm. In the 13 weeks ended May 5, 2018 the parent company earned $39.9 million on sales of $823.0 million compared to net income of $25.2 million on sales of $761.8 million in the quarter ended April 29, 2017. — NM
The complete conference call can be found here: https://seekingalpha.com/article/4178601-american-eagle-outfitters-inc-aeo-ceo-jay-schottenstein-q1-2018-results-earnings-call?page=1
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