Robert Hanson has his work cut out for him at American Eagle Outfitters Inc., where he assumed the chief executive officer position on Jan. 30. The teen retailer’s growth trajectory has fizzled, higher raw materials and manufacturing costs have compressed margins and its aerie intimates concept is stalled.
Increased discounting during the holidays and higher merchandise costs crimped fourth-quarter earnings at the Pittsburgh-based company. For the three months ended Jan. 28, net income declined 41.1 percent to $51.3 million, or 26 cents a diluted share, from $87 million, or 44 cents a share, in the year-ago period. The results included store impairment charges of 7 cents a diluted share and executive transition costs of 2 cents stemming from the exit of former ceo James O’Donnell.
The promotional activity helped push up net sales in the quarter by 13.8 percent to $1.04 billion, from $916.1 million in the year-ago period, with strength in denim and wovens. Same-store sales in the quarter increased 10 percent, up against an easy comparison a year ago when comps dipped 7 percent.
On a conference call with analysts, Hanson, previously president of the global Levi’s brand, praised the core strength of the American Eagle brand, the company’s strong balance sheet and opportunities for growth internationally. However, he acknowledged, “I clearly recognize the challenges of the past several years. Our top line has been essentially flat and margin erosion has been significant.”
His initial goals include tightening inventory, improving inventory productivity, turning around fashion items faster and devising a sourcing strategy that delivers higher initial markups. Additionally, the company will focus on accelerating growth in its e-commerce business, which accounts for 12 percent of sales.
Roger Markfield, executive creative director at American Eagle, said the company would refocus aerie on its core bra, panties and loungewear business, steering away from apparel and a broader lifestyle concept it previously embraced.
For the full fiscal 2011 year, total square footage increased 1 percent. This year, square footage is expected to decline slightly as the company plans to open 15 new stores and close 20 to 30 existing units. Most of the openings are slated for outlet centers, where productivity is high and American Eagle’s penetration is lower than its competitive set, with just 65 outlet units.
American Eagle operates 911 American Eagle Outfitters stores in the U.S. and Canada, 158 aerie stores and 21 77kids stores.
Gross margin in the quarter was 34.1 percent of sales, a 530 basis point decrease from 39.4 percent a year ago, the result of higher average unit costs for merchandise and increased markdowns during the holiday season.
Selling, general and administrative costs increased 13.2 percent to $219.7 million, from $194 million a year ago, which included $6 million in executive transition costs.
For the year, net income increased 7.9 percent to $151 million, or 77 cents a diluted share, from $140.6 million, or 70 cents. Revenue increased 6.5 percent to $3.16 billion from $2.97 billion.
London’s newly opened @designmuseum will look back on the life and work of Azzedine Alaïa in a show that the designer helped to curate before he died of heart failure last month. The retrospective, which Alaïa had worked on with Mark Wilson, chief curator of the @groningermuseum, will look at the impact of his work worldwide. The show, “Azzedine Alaïa: The Couturier,” will run from May 10 to October 7. Read more about the exhibit on WWD.com #wwdnews #wwdfashion (📷: @zefashioninsider)
@Pharrell and his wife Helen Lasichanh were among the stars that came out to celebrate @rimowa’s first pop-up concept shop. The space, which is located on Rodeo Drive in Beverly Hills, draws inspiration from airport luggage carousels and lounge areas – and features the company’s luggage and accessories. If the pop-up is successful it could pave the way for addition temporary shops throughout the world. #wwdfashion (📷: Owen Kolasinski/BFA)
@carineroitfeld celebrated @crfashionbook’s first calendar last night with a dinner party at Spring Place in Manhattan. Photographed by @stevenkleinstudio, the calendar takes on a fitness theme and features @joansmalls, @gigihadid, @danielle_herrington_ – pictured here – and more. “[Carine Roitfeld] wanted me to feel sexy and she wanted me to be myself and feel it out on my own and do what I felt was right,” said Herrington, aka Miss October. #wwdeye
@saintrecords and @virgilabloh last night at @americanexpress’ “A Night With Success Makers” event. “I always bring it back to community because without that I wouldn’t have the courage,” said Knowles when asked how she has gotten where she is now. Read more highlights from their conversation on WWD.com. #wwdeye (📷: @lizdoupnik)
This Just In: Industry sources have told WWD that Anastasia Soare is rumored to be considering selling her beauty business, @anastasiabeverlyhills. According to those sources, Soare has tapped investment bank Imperial Capital to explore sale options for her eponymous beauty brand –– and with at least $340 million in net sales, this would be a big deal. Put in context of other recent transactions for makeup companies, Soare’s price tag could be in the billions if she were to sell the whole thing. #wwdnews #wwdbeauty (📷: @clint_spaulding)
@assouline’s latest book, “The Spirit of Bentley: Be Extraordinary” captures the adventurous attitudes and opulent lifestyles of @bentleymotors’ most creative owners and enthusiasts throughout the U.K. The 292-page hardcover has a section dedicated to showing its team of skilled artisans and photos of its most colorful owners, from George Bamford to designer @alicetemperley, pictured here by Aline Coquelle. #wwdeye
@google released its report on the most popular search terms this year. For fashion brands, the list was led by @gucci, the luxury brand that stunned the market last October when it pledged to stop using fur. Runner ups were @supremenewyork and @fashionnova, along with more established brands like @louisvuitton, @chanelofficial and @ysl. #wwdfashion (📷: @aitorrosasphoto)
In yet another fashion show shuffle, @elleryland is moving its show in sync with the Paris couture calendar — though the brand is still keeping one foot on the city’s ready-to-wear schedule. Their runway show in January will coincide with the launch of a new strategy: designing two main collections each year instead of four, which will then be released in four drops. “As we all know, the system needs to change. We need to show sooner to give time back to artisans and designers to do what they do best — create,” said founder Kym Ellery. #wwdnews #wwdfashion (📷: @kukukuba)
@maxmara’s classic 101801 coat was the cornerstone of its pre-fall 2018 collection. The design team expanded the traditional double-breasted, kimono-sleeved style into a trapeze coat, lean belted styles and a peacoat and presented them in monochromatic looks – like the camel one pictured here. #wwdfashion #prefall18 (📷: George Chinsee)