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Aerie: by American Eagle

Added: Jun 2010
Aerie: by American Eagle

Added: Jun 2010
Aerie: by American Eagle

Added: Jun 2010
Aerie: by American Eagle

Added: Jun 2010
Aerie: by American Eagle

Added: Jun 2010

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Aerie Q3 Sales Rise 26% As It Adds 24 Locations

An image from the Aerie website.
An image from the Aerie website.

(Filed Under wholesale Lingerie News). Aerie third quarter sales jumped 26% as its comparable store comps rose 20% and the lingerie brand added 24 new stores while closing only one. Merchandise margins also rose.

“Comp sales growth built on a 32% increase last year, resulting in a two year stack of 52%,” boasted Jen Foyle, Aerie global brand president during the conference call to discuss the results. “The quarter also marked our 20th consecutive quarter of double-digit sales growth. We continue to gain meaningful market share in a healthy manner. Our customer base expanded as we attracted new customers to our brand and we also saw an increase in the average spend.” She noted the overall sales percentage increase without specifying the actual dollar amounts.

A fascinating aspect of Aerie’s success has been the positive role of brick and mortar stores, something the brand seemed slow to discover earlier in the decade. Aerie ended the fourth quarter of 2011 with 158 locations, then began to aggressively close stores year after year. By the end of the second quarter of 2016 it had just 91 Aerie stores. Around that time, however, Foyle made the surprising announcement during a conference call, perhaps initiated by a new piece of internal company research: “We know that 90% of our customers are acquired through brick and mortar stores.”

So, in mid-2016, the company reversed itself and began adding new, smaller, redesigned Aerie locations. Each year thereafter the count grew; it ended the third quarter of 2019 with 142 Aerie locations and by the end of 2020 should have close to 200, many more than it did in 2011. The physical stores not only help Aerie introduce itself to new consumers, but also help drive digital sales in new territories, the firm admits.

Parent company American Eagle Outfitters, which offers a variety of additional apparel categories, saw total sales rise 6.2% to $1.066 billion, from $1.004 billion in the quarter ended November 3, 2018. Meanwhile, net income for the company as a whole dropped 5.5%, from $85.5 million last year, to $80.8 million in the three months ended November 2, 2019. As to the actual sales contribution of Aerie to the total, Foyle relied on a phrase she has used before, “we have an exciting product lineup and continue to have visibility to exceeding $1 billion in sales.”

During the conference call Foyle noted that “In the third quarter the number of transactions grew, fueled by positive traffic across all channels. Our store traffic was well ahead of mall averages, the average transaction size increase led by higher average unit retail prices. And despite a highly competitive environment, we controlled promotions and strengthened our margins compared to last year.”

“Merchandise collections have been very well received by our customers, with all major categories delivering comp increases. Intimates are performing extremely well with bras and undies continuing to be our consistent core category. I’m also extremely pleased with the response to our apparel collection, which is posting outstanding results.”

During the third quarter Aerie opened 12 and closed one stand-alone location, while adding 12 Aerie side-by-side stores (which are located inside American Eagle full line shops). Year to date the brand has opened a total of 52 combined locations, while closing two. And during its full fiscal year 2019, Aerie projects it will have opened “60-75” new locations while closing “5-10” non-performing stand-alone stores.

On the subject of Aerie locations, Foyle said, “Our store expansion plans are also tracking well,” adding, “we are seeing a clear benefit from our store opening activity, including a digital uplift in new markets. We are very pleased with the execution of our real estate strategy at Aerie, and believe it remains a key success factor for the brand. Digital, is also growing rapidly and represented nearly 40% of our business in the third quarter.”

CFO Bob Madore emphasized that American Eagle is “going to continue to accelerate Aerie, and looking to 2020 we’re going to open a comparable number of stores to this year.”

According to Foyle, "we definitely were less promotional,” at Aerie in the third quarter. “We’re definitely getting paid for all the labor we’re putting into our garments and we’ve really focused on pulling back on promotions and be more strategic with our promotions.”

One of the results, according to Jay Schottenstein, CEO of American Eagle, is that at Aerie “we actually saw a very sizable increase in merch margin, roughly a 400-basis point improvement.”

During the conference call one analyst referred to the Victoria’s Secret sister brand, Pink, which is directed at the same, younger consumer as Aerie: “you know Pink is being very, very promotional, particularly on the apparel side and it sounds like you know that’s not hurting you, clearly, congrats!” Then she asked, “just wondering, you know, what you’re seeing there, and if you see Pink emerging as a more potent competitor going forward?”

Foyle replied: “We’re really proud of how we lead this body positivity movement Janet and I think it comes really from a place of authenticity. And as we see a lot of competitors are now following suit, it keeps us ahead of our game, and we have to keep on thinking on what to do different next year and how we can keep on surprising our customer. Regarding product, this team is on fire, okay. The design team and the merchant team has never more been focused. We are working tirelessly, looking at every item, every detail, every wash, every button. I can only tell you how much we labor over the top 25 items in this brand and we are continuing to do that. I’m thrilled with the spring assortment. The marketing, I’ve already seen it, it’s phenomenal. And all of – I love competition, because it makes us think harder and sweat things out a little bit more and keeps us humble, so I welcome it.”

In response to a question about tariffs and China production, Schottenstein noted that for AEO, “for this quarter, coming off in Q4, we expect roughly a $3 million to $4 million impact as a result of tariffs, and China represents roughly 30% of our unit volume that we source globally.”

Asked about bralettes during the call, Foyle declared, “they had an amazing quarter.” She continued, “Everyone got into the business fast and furiously when it was trended. I would like to say we were one of the first to do it big and do it well and, that said, you know a lot of our competition sort of weaned their assortments down and we continue to hold the course. And it’s proven to be great for us. So that’s a core part of our business in bras and they had a great quarter.” — NM

The full conference call transcript can be found here:

more wholesale Lingerie News >>

Published 12-12-2019 by Nick Monjo

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