American Eagle Outfitters is winning more fans among women as sales of lingerie, jeans and other styles helped the teen retailer boost sales during a tough holiday season for retailers.
Stronger sales of women’s apparel drove solid sales growth of 3 percent and surging profits for the fourth quarter that ended Jan. 30, a period in which other retailers such as Macy’s suffered steep losses.
The company’s Aerie lingerie stores in particular exceeded expectations, said CEO Jay Schottenstein, with strong sales growth of 26 percent. American Eagle executives credited Aerie’s success largely to its “real” marketing campaign, which uses models of all sizes instead of relying solely on those who are thin.
“The core of what’s happening in Aerie is this marketing campaign,” said Jennifer Foyle, global brand president at Aerie. “The Aerie real campaign is really authentic and is resonating.”
The Aerie brand is a smaller portion of the company’s retail outlets. There are 101 Aerie stores in the United States and Canada versus 955 American Eagle stores. Executives said expanding Aerie’s brand would be a key focus in 2016.
Two years after launching a turnaround plan, American Eagle remains a leader among teen retailers in developing new styles and controlling inventory so it does not have to compete as heavily on price, said Rebecca Duval, an analyst at Bluefin Research in Boston.
“I still believe that they are leaders in terms of innovation and they’re probably one of the best in managing inventory,” she said. “I only see them getting better at that.”
Teen retailers have struggled to compete with fast fashion chains such as Forever 21 and H&M, which sold inexpensive clothing and forced the industry to compete on price.
Other teen retailers, such as Abercrombie & Fitch, have followed American Eagle’s strategy to focus on merchandise and store management rather than price. Abercrombie has updated its merchandise and given stores more flexibility on where to place products.
Abercrombie on Wednesday reported a 33 percent surge in fourth-quarter profit and its first quarterly same-store sales gain in more than three years.
Aerie’s success also demonstrates American Eagle’s leadership in the industry, building deeper connections with its customers through the “real” campaign, which has broadened its appeal beyond teens, Duval said.
“There’s no one else tackling that issue with women and girls in general,” she said. “To make it feel like it’s every woman.”
American Eagle could not avoid the impact of the warm winter, which resulted in slower mall traffic and forced it to take bigger markdowns than it expected in January to compete with steep discounts offered by other retailers.
It still outperformed other retailers such as Macy’s, which reported a 31 percent drop in profit during the holiday shopping season.
The South Side-based teen retailer had net income of $81.7 million, or 42 cents per share, in the 13-week period that ended Jan. 30. That was up from $61.6 million, or 32 cents per share, in the same period a year ago.
Sales in stores that were opened at least a year increased 4 percent compared to a flat quarter a year ago. Same-store sales are a key measure of a retailer’s performance because it does not count revenue from adding new locations and shows growth from improved management.
Total revenue for the quarter was $1.1 billion, up 3.1 percent from $1.07 billion a year ago. Expenses for the quarter increased 3 percent to $233 million, up from $227 million a year ago.
Source : Triblive