American Eagle Outfitters Inc. posted first-quarter results that beat Wall Street’s consensus estimates for both earnings per share and revenues.
For the three months ended April 30, net income rose 39.3 percent to $40.5 million, or 22 cents a diluted share, from $29.1 million, or 15 cents, a year ago. Total net revenues rose 7.1 percent to $749.4 million from $699.5 million, on a consolidated comparable-store sales gain of 6 percent on top of a 7 percent increase last year. Wall Street was expecting 18 cents a share on revenues of $731.4 million.
The company said gross profit rose 12 percent in the quarter to $293 million. Further, operating income increased 40 percent to $59 million from $42 million a year ago, and operating margin expanded by 180 basis points to 7.8 percent as a rate to revenue, the company said.
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Shares of American Eagle, which posted results after the markets closed, ended the trading session down 3.4 percent to $13.39 in Big Board trading, but then shot up 14.3 percent to $15.30 in after-market trading following its report.
Jay Schottenstein, chief executive officer, told analysts in a conference call that the quarter’s results wouldn’t have been possible “without great merchandise, strategic investments and strong execution.”
He said e-commerce was “exceptionally strong, with positive strong comps.” Product leadership and customer acquisition remain top priorities for the teen retailer, Schottenstein said. The ceo also noted that technology and omni investments have helped the company move faster, citing how the company drove nearly $30 million in revenues through flexible fulfillment options, such as ship-to-store.
“I believe our brightest moments are still ahead,” Schottenstein said, noting that Aerie has a “long runway ahead,” and that future prospects are good too for Tailgate Clothing Co. and Todd Snyder. The ceo said that while he is “optimistic about the future, yet aware of the challenges.”
According to Chad Kessler, global brand president for the American Eagle brand, in a telephone interview, women’s had positive comps across all apparel categories, while men’s were slightly negative, with the exception of positive comps in men’s bottoms, T-shirts and woven shirts. “We definitely believe there are opportunities going forward in men’s,” he said in a telephone interview.
Kessler said the company will launch a new fabric for its denim line at the start of the back-to-school selling season in both men’s and women’s. He declined to provide specifics, but said a key strategy for the total business is “bringing in more innovation and better value across all categories.” Kessler noted that about three-quarters of the assortment is changed over in denim in both men’s and women’s for back-to-school. The company last year introduced flexible denim, which Kessler said was well received, noting that it takes about a year to develop the fabrication and test consumer response before introducing it to its stores.
He said on the call that comps rose 4 percent at the American Eagle brand, and that the multichannel shopper is the fastest-growing segment for the brand and that they spend twice as much as the single-channel shopper.
Jen Foyle, global brand president for the Aerie brand, said in a telephone interview that the company has a small beauty team in place that is now testing some ideas to broaden its beauty offerings. It is considering different five-year strategic initiatives.
She said the Aerie business is also testing some smaller standalone stores, although “we love the side-by-side connectivity” of being able to leverage the good will of the American Eagle brand by having the Aerie store next store. The stand-alone format being tested tends to be about 40 percent to 60 percent more productive, she said.
On the call she said comps rose 32 percent, with strength across all channels. Digital represented 30 percent of the business. Foyle also said the company has a beauty team in place, but that “We will walk before we run,” adding that there’s still are still opportunities available within it core aerie business.
For the second quarter, the company is guiding EPS at between 20 cents to 21 cents, compared with 17 cents a year ago.
Separately, the company named Kyle Andrew executive vice president and chief marketing officer, effective June 6. She reports to Schottenstein. She held previous marketing stints at Kate Spade LLC, Kenneth Cole Productions and Gap.