(Filed Under wholesale Lingerie News). Aerie comparable sales jumped 32% in the quarter ended November 3rd, which came on top of a 19% comp sales jump in the same three months last year.
Aerie, the intimates division of parent company American Eagle Outfitters (AEO), noted that this marks “16th consecutive quarter of double-digit comp growth,” and it added that it will accelerate the pace of Aerie new store openings, with 60 to 70 planned for 2019.
During the conference call to discuss the results with analysts, AEO executive chairman and CEO Jay Schottenstein boasted, “Aerie is rapidly gaining share in the innovative apparel market as a leader in the body positivity movement. Market share gains have been impressive and results have been spectacular. Still in the early stages of growth, Aerie is a significant growth engine for AEO, Inc. We are accelerating that growth with our sights on the next brand milestone of $1 billion.”
Explaining the success for Aerie during the call, global brand president Jennifer Foyle emphasized Aerie “delivered third quarter results on less promotional activity and higher margin flow through,” adding “our sales metrics are positive across the board. Traffic was particularly strong as we continue to gain brand awareness and grow our customer base. We also saw broad-based category strength with all major areas up to last year. The AerieREAL bra launch was a huge success as our customers embraced our proprietary fit, technology, great style, comfort, and an expanded size range.”
A big part of the success for Aerie has been its marketing approach, and Foyle reported she was “pleased with the enormously positive response to our most inclusive campaign yet, which featured a diverse cast of real women.” And Schottenstein also noted during the call that Aerie had been “honored by Adweek with the Prestigious Brand Genius Award for apparel. This honor places Jen and the team as one of the boldest and most imaginative brand leaders of the year.”
Aerie’s explosive growth can also be attributed to its strategy of providing its customers an expanding variety of products, not just bras and panties. Foyle reported “strength across apparel was another significant highlight of this quarter, which produced our strongest year-over-year increase. The team has done a nice job adding newness, softness, and innovation in tops, which perfectly complements the bottoms business and complete the Aerie lifestyle.”
Aerie’s expansion into apparel comes even though AEO also offers an vast quality of clothing for women and men under its American Eagle, Todd Snyder and Tailgate brands. Aerie now sells its own branded swimwear, sweaters, sweatshirts, jumpsuits, overall shorts, rompers, cover ups, dresses, shorts, leggings, pants, tops, ponchos and more. While in recent years competitor Victoria’s Secret emphasized a strategy of eliminating apparel and swimwear, stripping its brand down to its “core” underwear, Aerie moved in the opposite direction and has met with success.
“What I love about Aerie is, we are a lifestyle brand,” explained Foyle during the conference call, with both intimates and apparel “helping the product margins.” She added, “so we can throttle different businesses when they’re trending and we’re not just solely dependent on intimates, although obviously that’s what we stand for in Aerie.”
Another factor in the Aerie surge was the realization, despite the rise of internet selling, that brick and mortar stores were not the enemy of the brand’s growth. As Foyle noted during a conference call at the end of 2015, Aerie eventually discovered “that 90% of our customers are acquired through brick and mortar stores.” In other words, even though the brand has enjoyed strong internet sales, stores are a key part of the equation. It took some time for the company to make this discovery, however. From the end of 2011, when it was operating 158 brick and mortar Aerie stores, the company actually spent the next several years closing locations, ending up with just 91 by the first half of 2016.
Then it abruptly reversed course. As of November 3rd of this year there were 110 Aerie stand alone stores and 142 Aerie “side-by-side” locations. Of the 60 to 70 new locations planned for 2019, about half will be stand alone.
An important insight for Aerie has been that online sales in an geography are actually accelerated by a physical store in that area. Said Foyle, “as we enter new markets, it’s certainly coming to life, so we’re really excited. That’s why we’re moving fast and furiously into next year with the 60 or 70 stores.”
During the conference call, Foyle also provided details about the recent AerieREAL bra launch in which “we redesigned every bra frame in Aerie, which was a group effort.” She continued, “we reached out to our customer base and they were the cast of this launch and it was so well received just because it was really understandable and authentic.” She concluded, “it was an amazing campaign, but I will tell you we left some money on the table, which I love. We added – extended sizes, smaller and larger and we saw them sell out. So there’s really good news there, which means that we still have opportunity in bras to really grow that business and ultimately grow market share.” — NM
The complete conference call transcript can be found here: https://seekingalpha.com/article/4227802-american-eagle-outfitters-inc-aeo-ceo-jay-schottenstein-q3-2018-results-earnings-call?page=1
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