Aerie brand's growth lifts American Eagle Outfitters in Q2 earnings

Dive Brief:

American Eagle Outfitters Wednesday reported results that beat expectations, buoyed by its Aerie lingerie brand. Q2 same-store sales rose 3%, edging out expectations from Thomson Reuters. Of that, American Eagle same-store sales increased 1%, while Aerie same-store sales rose 24%.
The retailer reported Q2 earnings of $41.6 million, compared with $33.3 million during Q2 last year. Q2 revenue increased 3.2% to $822.6 million, compared to a revenue forecast of $820 million by Thomson Reuters.
American Eagle says it expects third quarter earnings to be approximately 40 or 41 cents per share, compared to 35 cents per share of a year ago, and anticipates a low single digit increase in same-store sales.

Dive Insight:

American Eagle's turnaround has been one of the biggest success stories in the teen apparel market, thanks in large part to its highly successful Aerie brand. Aerie’s marketing strategy eschews photoshopping models, a differentiation that has resonated with younger consumers.

Retailers like American Eagle, Abercrombie & Fitch, American Apparel, and Aeropostale were hit hard in recent years by increased competition from fast-fashion retailers like Forever 21 and H&M, which provided trendy pieces at low prices. Abercrombie has seen success in backing away from its highly sexualized, label-heavy promotional plan of past.

In addition to the marketing and sales success at Aerie, the retailer has also made a point of increasing the quality of its jeans and has focused on tightening up its inventory. All that is “clearly paying off,” says CEO Jay Schottenstein.

“For the past few years, we have worked hard to lift our brands through merchandise leadership and innovation, strengthen our customer focus and invest in technology,” Schottenstein said in a statement. “As we enter the fall season, our execution, focus and market opportunities are greater than ever. In today’s evolving retail landscape, we are committed to offering the very best product and customer experience to position AEO’s brands as leaders in a new generation of successful retail brands.”

The positive earnings report reinforces the company line that last year's poor Q4 earnings were the result of macro headwinds that American Eagle has since put in its wake. The retailer's turnaround appears to be working, and it's showing in the latest earnings.