Meanwhile, the retailer expects current quarter revenues to grow, compared with the first quarters of 2019 and 2020.
By Kellie Ell | Link to article
Aerie continues to be American Eagle Outfitters’ best asset.
The retailer — parent to the American Eagle, Todd Synder and Unsubscribed brands, as well as the innerwear and loungewear brand — posted quarterly and full-year results Wednesday after the market closed, with Aerie surpassing more than $1 billion in revenues for the year.
The results mark the brand’s 25th consecutive quarter of double-digit growth, with digital sales surging 75 percent during the quarter and comparable sales up 29 percent year-over-over. Activewear was Aerie’s highest growth category, driven by the success of Offline by Aerie, followed by intimate apparel, which grew at a double-digit rate with strength in bras and underwear thanks to last year’s work-from-home lifestyle.
But even as COVID-19 vaccines continue to roll out nationwide and mask and social distancing mandates start to ease in some parts of the U.S. — and more and more consumers feel comfortable attending large-scale gatherings — Jennifer Foyle, chief creative officer of American Eagle Outfitters and global brand president of Aerie, said she’s not worried about the future of the brand known for its fashionable loungewear.
“I’m really excited about that challenge,” Foyle told WWD in an exclusive interview. “We are definitely seeing signs [of demand for more occasion wear]. There’s definitely a jeans shift, for sure. And there’s always tops that need to go with that on the AE side. And the way I’m looking [at Aerie] is, how does Aerie support that [shift] with our foundations and our great intimates business? Which is the core to everything we do.
“This business is not going away,” she added. “Leggings are here to stay.”
In fact, Aerie continues to gain traction thanks to its body positivity messaging and pledge not to airbrush models. As of December 2020, the brand had 4 percent share in the women’s U.S. intimate apparel market, according to market research firm The NPD Group.
“We always just stay in our lane,” Foyle said. “We just hit our billion-dollar mark. I could not be more thrilled. Our goal now is to get to $2 billion and that is increasing our intimates category, both undies and bras. Certainly, pulsing on our new category Offline, which includes sports bras.”
Foyle said Offline by Aerie, the activewear subbrand which launched in the summer, has beat company expectations, calling it a “killer category.”
“We’ve had a lot of brainstorm sessions, really trying to get at the DNA of this brand,” she added. “We’re just really digging into how we show up, like we do with Aerie. At Aerie we do not airbrush and it’s a body positivity brand. So how do we leverage that for Offline and what are some of the white spaces? I always look to the white space and what we do that others aren’t doing. I think we have some really great ideas to continue doing.”
The company opened its first stand-alone Offline by Aerie store in the Nashville, Tenn., area in the fall and now plans to open between 25 and 30 Offline by Aerie stores this year, a mix of stand-alone, side-by-sides and shops-within-shops — that’s in addition to roughly 50 stand-alone Aerie stores as the retailer continues to optimize its fleet. The next Offline location, a shops-in-shop inside an Aerie store in Greenwich, Conn., is coming this spring.
“We’re testing different formats to see what really resonates as we continue to grow and expand this business,” Foyle said. “And we have this beautiful halo effect when we enter a new market. We see [sales] play out online as well.”
Meanwhile, American Eagle’s jeans business continues to grow with a variety of silhouettes and technology offering new ways to shop. Last month, the brand launched an augmented reality jeans shopping guide with Snapchat, tapping “Outer Banks” stars Chase Stokes and Madison Bailey for the campaign.
Jay Schottenstein, American Eagle Outfitters chairman and chief executive officer, recently told WWD that the brand’s ability to resonate with shoppers is why American Eagle performed so well — despite this year’s store closures and reduced promotional activity throughout the holiday shopping season.
“After an unprecedented year, we ended 2020 on a positive note, with fourth-quarter adjusted operating income up 38 percent, driven by strong margins across all brands,” Schottenstein said in an earnings release Wednesday. “I’m very proud of the entire organization — our teams executed exceptionally well. We ended the year in a healthy cash position and took bold actions to ensure AEO is well positioned for future success, including steps to right-size and strengthen our store fleet, while also continuing to fuel our robust digital platform.
“We entered 2021 with momentum and, as reviewed in our January investor meeting, we see significant opportunity to drive Aerie’s growth and deliver strong profit margins in the coming years,” Schottenstein continued. “The fourth-quarter results reflect progress on our ‘Real Power. Real Growth’ plan and provide confidence in our value creation opportunity and multiyear financial targets.”
Total revenues for the three-month period ending Jan. 30, were $1.29 billion, compared with $1.31 billion during 2019’s fourth quarter. Decreased mall traffic and store closures amid the pandemic caused the quarter’s 1 percent decline in comparable sales. Store sales fell 20 percent, while digital sales increased 35 percent, year-over-year.
For the first time, the retailer also revealed individual sales figures at its two biggest brands. Total revenues for American Eagle decreased 9 percent to $943 million, with comparable sales down 8 percent. American Eagle’s e-commerce sales (similar to Aerie) were a bright spot for the brand, with digital sales growing 20 percent during the quarter, year-over-year. At Aerie, total revenues increased 25 percent to $337 million during the quarter, year-over-year.
The company logged $3.5 million in profits for the quarter, compared with $4.76 million in profits during 2019’s fourth quarter.
For the year, total company revenues were $3.75 billion, down from more than $4.3 billion a year earlier, also largely due to store closures and reduced store traffic amid lockdowns. The retailer lost $209 million for the full year, compared with gains of more than $191 million in 2019.
Capital expenditures were $35 million for the fourth quarter and $128 million for the full year. The retailer expects capital expenditures to be in the range of $250 million and $275 million for the 2021 fiscal year, prioritizing customer-facing and supply chain investments.
As of Jan. 30, the retailer had a store fleet of 1,078 locations, or 901 American Eagle, 175 Aerie, 179 AE and Aerie side-by-sides and two Todd Snyder units. The firm closed more than 50 American Eagle stores in 2020.
American Eagle Outfitters ended the quarter with $850 million in cash and cash equivalents and $325 million in long-term debt.
The company is not offering annual guidance, but expects 2021’s first quarter to surpass both 2020 and 2019’s first quarters in terms of sales.
“There were definitely some interesting hurdles in February, where Valentine’s fell on the long weekend, the President’s [Day] weekend,” Foyle said. “There was just a little bit of some shift in the calendar that I think were some headwinds. [But], we pulled back some major promotions in February. So, so far so good. I’m pleased [with the current quarter].
“And from what I see, kids are still planning on going on spring break,” Foyle said. “Maybe it’s slightly different, but I really believe it will be a perfect storm, particularly when those stimulus checks go out; tax returns are going out as well and the milder weather, more schools are opening. And certainly the comfort with the vaccine.”
Shares of American Eagle Outfitters, which closed up 1.27 percent on Wednesday to $25.43 a piece, are up about 97.5 percent, year-over-year.
