(Filed Under wholesale Lingerie News). Sales of Aerie intimate apparel rose 26% in its fiscal fourth quarter, and rose 20% for the full year ended January 30, 2016.
The intimates division of American Eagle Outfitters also revealed plans to soon open 35 new Aerie locations, a dramatic reversal for the company which has closed a net 61 of its lingerie stores since the end of its fourth quarter 2011, when it had 158. As of the end of its fourth quarter 2015 there were only 97.
Despite the smaller number of stores, the Aerie brand has been growing dramatically in recent quarters. Tests of smaller and redesigned Aerie stores have proved successful. But even more important, Aerie now realizes the importance of brick and mortar locations. During a conference call with financial analysts late last year, Aerie global brand president Jen Foyle revealed “We know that 90% of our customers are acquired through brick and mortar stores.”
During that earlier call Foyle said Aerie was going to open 10 new stores in 2016, but in the March discussion with analysts she announced a the much greater expansion: “The financial of the new store [format] are very, very compelling. Based on the success, we plan to open 10 standalones and 25 side-by-sides in new and under-penetrated markets.”
What makes Aerie’s newfound enthusiasm for brick and mortar particularly fascinating it that the brand has one of the youngest demographics in the lingerie business with a significant portion of its business coming from online sales. “We saw strong online traffic, and consistent growth in our digital business, with sales increasing over 40% in the fourth quarter,” said Foyle. Yet she has abruptly decided to open 35 new brick and mortar stores.
The sales gains for American Eagle as a whole, which also includes an extensive line of men’s and women’s apparel, were significantly more modest than the lingerie division; sales increased only 3% in the fourth quarter and 7% for the year.
In the fourth quarter, parent company American Eagle reported income from continuing operations of $81.7 million on sales of $1.106 billion compared to income of $70.1 million on net revenue of $1. 072 billion in the quarter ended January 31, 2015.
For the full year ended January 30, 2016, American Eagle reported income from continuing operations of $213.3 million on sales of $3.522 billion, compared to income last year of $88.8 million on sales of $3.283 billion.
In describing her division’s results, Aerie president Foyle noted that the latest quarter marked “our seventh consecutive period for positive comps and earnings growth,” adding that “I am also extremely pleased to see positive store traffic, which clearly outpaced the mall. We grew our active customer base by over 12% for the year, as the result of great product, fresh marketing, and broader digital and store reach.”
“Our fourth-quarter holiday collections were well received by our customers. We saw positive comps nearly in all categories. Our major businesses, including bras, undies and apparel increased by over 30%; and new offerings such as bralettes, swim and sleep drove incremental business.”
Foyle said she was optimistic going forward as well. “As we enter spring, I feel really good about our assortment,” she said adding that spring merchandise “performed extremely well in January, and that momentum has continued into first quarter. Now looking at the year ahead, I would like to talk through our key focuses. From a product perspective, we will continue to drive innovation, and enhance our quality and design to maintain momentum. We will further develop novelty businesses and expand offerings to include new categories, as well as additional sizes and broader online assortments.”
“Financially, we will aim to further strengthen our margins. We will take advantage of cotton and product cost opportunities, reduce markdowns, and implement a more strategic approach to fabric and chase capabilities.
Next, digital and store growth are key to brand expansion and new customer acquisition. We see ongoing growth as we ramp up our digital marketing and broaden online offering, and more proactive in our customer outreach. Selective store growth is also key.”
Foyle also emphasized her reliance on the company’s advertising strategy which promotes images of “real” un-Photoshopped models. “Marketing is also a major priority, as we engage our customers in a unique way. The Aerie Real campaign is a point of differentiation, and has created a strong connection with young women. With growing increased, and increased customer engagement, media impressions, specifically on the Aerie Real campaign, rose to 4 billion in 2015, up dramatically from last year. We put the Real concept at the center of everything we do. We will continue to build on this message, such as our current Strong, Beautiful Me campaign.”
Foyle listed some of the aspects of Aerie’s business which she expects to contributed to growth going forward including “a new fit category” launched in January and “novelty bralettes, that’s been a huge category for us.” She also noted “Lounge has been extremely well, so our soft dressing categories, and we’ll continue to expand that.”
Speaking about Aerie’s brick and mortar experiments Foyle explained, “we’ve tested four smaller store formats that are highly successful. We’re really pleased with the productivity we’re seeing, and we’re comping in smaller square footages in same malls, and the productivity is up roughly % in those formats. So we’re excited to grow a smaller footprint.”
A complete transcript of the Aerie conference call can be found at http://www.thestreet.com/story/13481129/1/amern-eagle-outfitters-aeo-earnings-report-q4-2015-conference-call-transcript.html.
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