(Filed Under wholesale Lingerie News). Aerie intimate apparel comparable store sales rose 21% in the third quarter after rising 18% in the second quarter. For the year the brand is up 17%. Now, instead of closing stores it plans to open more.
In recent years parent company American Eagle Outfitters had been rapidly shutting Aerie stores (reducing the number to 97 by August 1, 2015, from a peak of 158 at the end of fiscal 2011). But during a conference call with analysts to discuss financial results, Aerie global brand president Jen Foyle said the company has changed direction and will “open approximately 10 standalone formats in 2016 and hope[s] to expand beyond that based on this success.” The new appetite for stores comes after experiments with smaller, redesigned formats proved successful.
In the quarter ended October 31, for American Eagle as a whole, income rose to $74.1 million on sales of $919.1 million, compared to a profit of just $9.0 million on sales of $854.3 million in the quarter ended November 1, 2014. For the first nine months, income rose to $136.4 million on sales of $2.416 billion compared to a profit of $18.7 million on sales of $2.211 billion for the same period last year.
In the conference American Eagle CEO Jay Schottenstein boasted, “We’re just beginning to see the true potential for Aerie. Based on the strong performance of our new store formats, we are planning to accelerate store unit growth in 2016. With further success we expect to ramp up beyond that. Needless to say, we think the future for Aerie is exceptionally bright. I’ll reiterate our goal of doubling the business over the next few years. These investments will put us on the right track to achieve that.”
In fiscal 2014, Aerie contributed about 8% of American Eagle’s total sales of $3.3 billion, or about $240 million. Thus, Schottenstein’s prediction would be for Aerie’s sales to eventually reach $480 million.
In an interesting revelation about where Aerie plans to expand, as well as the importance of stores versus online presence in attracting new customers, brand president Foyle explained, “Currently, we have meaningful store presence in only 11 states. We know that 90% of our customers are acquired through brick and mortar stores. This highlights the exciting potential to launch Aerie into new markets.” Once acquired, Aerie has been successful at moving business online. “Our digital business has been exceptionally strong representing about 23% of Aerie’s total sales. We see ongoing growth as we ramp up digital marketing and more productive customer outreach.”
Foyle noted that the latest results mark Aerie’s “sixth consecutive quarter of positive comps year-over-year earnings growth,” adding that “across all categories, all of our major businesses increased well into double digits including bras, undies and apparel.”
“Our margins expanded 280 basis points, fueled by lower markdowns and more full price selling,” she noted, adding that the brand has expanded its “novelty” business which “includes bracelets, new accessories, a focus on gifting and brand right soft dressing.” Aerie also plans to expand in the areas of “personal care, accessories, soft dressing, fitness and swimwear.”
“We are seeing more and more opportunity to strengthen the emotional connection with today’s young woman. Our customers believe in what we stand for. Aerie real and untouched models are the core to our brand DNA. So far this year, our active customer base has grown by over 10%. In 2016, we will ramp up our advertising campaigns to further engage our customers in unique ways and focus on continuing to build our brand presence.”
Foyle also addressed the “very strong early results from our new store designs. In addition to 20 side by side stores in the new format, we now have four freestanding locations. The stores are more modern, easier to shop and much more relevant to today’s target customer. The financials are compelling with sales productivity trending 60% above our legacy stores with higher four-wall profit. Based on this success, we will be selectively pursuing growth through new freestanding store openings and remodeling existing stores to our new format.”
The complete transcript of the latest conference call can be found here: http://seekingalpha.com/article/3729336-american-eagles-aeo-ceo-jay-schottenstein-on-q3-2015-results-earnings-call-transcript
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