(Filed Under wholesale Lingerie News). Aerie comparable store sales rose 16% in the second quarter following a 27% increase in the same quarter last year. This marked the 19th consecutive quarter of double-digit growth for the brand.
Aerie also announced it had opened, during the quarter, 13 new (and closed one) stand alone Aerie stores as well as adding seven “side by side” shops (which are attached to American Eagle Outfitters apparel locations). In all, as of the beginning of August, there were 131 Aerie stand alone stores and 158 side by shops (of which 125 were located in the U.S., 15 in Canada and 18 in Mexico).
In the second half of its fiscal year the company predicted it will open between 18 and 23 additional, new stand-alone Aerie shops, while closing from four to nine non-performing locations.
And Aerie nowhere near done growing. During parent company American Eagle Outfitter’s (AEO) conference call with analysts to discuss the quarter, Jen Foyle, Aerie’s global brand president, explained “We still have meaningful locations and opportunity to expand our footprint in the coming years, with a sizable retail presence of 10,000 square feet in only 23 states.”
AEO as a whole earned $65.0 million on sales of $1.04 billion in the three months ended August 3, compared to a profit of $60.3 million on sales of $964.9 million in the same period last year.
Without providing the exact dollar amounts, Foyle noted that during the quarter Aerie “revenue increased more than 20%.” She went on, “Traffic was positive across all channels with stores well outpacing mall averages as we continue to attract more customers to Aerie. Our basket size is also expanding at a very healthy clip, driven by increased units per transaction and strong AURs [average unit retail]. In the second quarter, all categories posted sales growth. Bras were one of the strongest areas in the quarter. We saw healthy demand for core bras and renewed excitement for bralettes.”
Foyle also described a “very positive response to our new apparel collections. Our bottoms business remains robust, and due to strong demand, we were chasing tops throughout much of the quarter.”
She continued, “Brand awareness continues to grow. Aerie’s Brand body -- body positivity platform and empowerment is our strength and underpins the encouraging emotional connection with our customers. The power of self-love and acceptance builds trust and loyalty, and that is truly what the AerieREAL movement is all about. As a result, our customer file continues to expand. Retention rates are growing, with existing customers shopping more frequently and buying more categories from Aerie.”
Speaking about the store openings during the quarter, she pointed to an “emphasis on new and filling markets, including openings in Texas and California, which are priority states for us. As we enter new markets, we are seeing an uplift in our digital business in those markets as well.” Foyle added, “I’m also very pleased with the performance of re-modeled stores in our latest design. In fact, 10 of our re-modeled locations and several new stores quickly rose to be among our top 25 most productive locations. This validates our real estate strategy and the power of Aerie.”
She concluded, “Our back-to-school season has been a terrific success. I’m very encouraged by sales trends in key seasonal apparel categories, as well as strength in intimates. I’m confident that we will continue our strong momentum into the second half of the year. Beyond that, we have visibility to exceeding $1 billion in short order and see great potential for Aerie over the longer term.”
American Eagle’s CFO Bob Madore revealed that during the quarter, “Aerie’s gross margin rate was pretty much flat. They had a very strong quarter in spite of what was an extremely promotional environment.”
He also discussed the impact of China tariffs on the company as a whole. “We have actively collaborated with our sourcing partners to meaningfully mitigate the potential impact. In addition, we continue to make progress in further reducing our exposure to China tariffs through a combination of partnering with vendors and diversifying our geographic production capabilities. Based on recently enforced tariffs List 4, we do not expect a material impact this year. At present, we expect the impact to be manageable in 2020.”
Asked during the conference call about the renewed interest in bralettes, Foyle replied, “We really have always had a strong business in bralettes. Certainly was -- it really peaked as a trend a couple of years ago, few years ago, in fact. But we stayed with it, and it’s our business, and we own it. So we feel proud of what we’ve done there and it hasn’t really eaten into our core bras. In fact, we’ve been very disciplined in bras.” — NM
The entire AEO conference call transcript can be found here: https://seekingalpha.com/article/4289636-american-eagle-outfitters-inc-aeo-ceo-jay-schottenstein-q2-2019-results-earnings-call
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