Dive Brief:
- The American Eagle brand’s second quarter comparable sales dropped 1% year over year, according to a Wednesday release. Aerie’s comps grew 19%, helping American Eagle Outfitters’ overall net revenue increase 8% to $1.4 billion.
- American Eagle’s men’s business posted another quarter of positive comps, American Eagle Outfitters CEO Jay Schottenstein said on a call with analysts Wednesday. Meanwhile, the company remains “focused on opportunities to drive greater consistency in the women’s business” for its namesake brand, he added in a statement.
- Markdowns at American Eagle offset some merchandise margin improvement at Aerie during the period and more markdowns for the namesake brand are anticipated in Q3 as the retailer works through certain inventory, former CFO Mike Mathias, who is still advising the company, said on the call.
Dive Insight:
Despite American Eagle’s high-profile marketing work with Sydney Sweeney this past year, the brand is still struggling to sell to women. The campaigns with the celebrity focused on denim pants and shorts.
“Look, we're seeing sequential improvement in denim,” President and Executive Creative Director of American Eagle and Aerie Jennifer Foyle said on the call when asked about women’s denim specifically. “As I mentioned in my last earnings call, we definitely need to pivot. We needed to pivot, and we pivoted quite nicely into the fits that were working 100%.”
That pivot meant getting into more low rise styles, Foyle added, but the company still needs to work through older fits and rebalance inventory.
“AE remains a laggard despite big marketing investments/favorable category trends, leaving us cautious,” BMO Capital Markets analyst Kelly Crago said in a note Thursday.
For the third quarter, American Eagle Outfitters expects comparable sales growth in the mid- to high-single-digits, with Aerie projected to grow double digits and American Eagle approximately flat, Mathias said on the call.
“AEO remains a tale of two brands, with Aerie remaining red-hot, but the larger American Eagle brand is still a bit of a mixed bag,” Needham analyst Tom Nikic said in an emailed note Thursday, flagging that some tougher year-over-year comparisons are coming in the second half of the fiscal year, particularly for Aerie.
