Loungewear may be for relaxing, but it’s proving to be a sales workhorse for American Eagle Outfitters.
Aerie, the young adult retailer’s loungewear unit, continues to carry the company, with the intimates brand posting a sharp climb in revenue, even as the namesake American Eagle line posted tumbling sales in the summer quarter like many other rival retailers. Total net revenue across both brands fell 15% in the quarter to $884 million, compared to $1.04 billion a year earlier. Aerie’s total revenue in the period climbed 32%, while the American Eagle brand revenue slipped 26%, accelerating a divergence already apparent last year.
However, digital was up across all company units. Aerie grew digital revenue 142% year over year in its fiscal Q2 ended Aug. 1, while the retailer’s namesake, American Eagle, grew web sales 47%. For all of American Eagle Outfitters (No. 49 in the 2020 Digital Commerce 360 Top 1000), digital sales rose 74%. American Eagle did not break out specific digital sales by dollar amounts.
CEO Jay Schottenstein said in a press release that the retailer improved its business from the first quarter. Aerie largely helped that process and Schottenstein called its performance “simply outstanding.”
The strong Aerie results underscore the ways retailers are turning to their strongest business lines as the coronavirus pandemic upends the industry. Demand for loungewear has been a bright spot in an otherwise challenging period for apparel sales.
The stark divide between the retailer’s two brands has had some investors in the past consider if a spinoff of the high-performing Aerie line would be beneficial.
About 70% of Aerie’s sales were online during the quarter, Schottenstein said in a transcript obtained by Seeking Alpha. The number of customers across both brands increased 22% in the quarter and more than doubled in digital, he said. The retailer also said online sales of jeans, a staple product for the retailer, grew double digits during the quarter.
During fiscal Q2, American Eagle Outfitters launched local shopping sites in Japan, Hong Kong, Australia, Singapore, Taiwan, Malaysia and Mexico.
Mobile also is growing, said Michael Rempell, executive vice president and chief operations officer, on the call. “The penetration of our mobile channels continues to rise at over 60% currently,” he said. “Our mobile app customers are the most engaged and have the highest spend levels and more than double that of non-app customers,” Rempell said.
The retailer said on the call it is investing in its supply chain. It has regional hubs in Boston, Los Angeles and Chicago, with Jacksonville, Florida, opening this month. “Working in conjunction with our primary fulfillment centers, these hubs will provide improved delivery performance, cost benefits and sufficient capacity for us to manage digital demand for the back half of the year,” Rempell said. “Given our expected strong growth in the digital channel beyond this year, we intend to strategically position additional distribution capacity in 2021 and beyond.”
American Eagle executives noted that the unusual back-to-school season is impacting this important sales period for the company. The retailer is trying to extend its back-to-school sales to later in the year, while simultaneously pulling some holiday sales earlier.
Additionally, Jennifer Foyle, who led the fast-growing Aerie line, was promoted to American Eagle’s chief creative officer, the company said in a separate statement. She will continue to oversee Aerie and also merchandising, design and marketing for the company’s namesake brand.
For its fiscal Q2 ended Aug. 1, American Eagle Outfitters reported:
- Total net revenue fell 15% to $884 million, compared with $1.04 billion a year earlier. The decline is mainly a result of store closures during the second quarter. Revenue in the year-ago period also included $40 million from Japanese license royalties, the company says.
- By brand, American Eagle revenue fell 26%, following a 1% decline last year. Aerie’s revenue increased 32%, following a 22% increase last year.
- American Eagle Outfitter’s digital revenue increased 74%, reflecting strong online demand and the easing of temporary fulfillment delays from the first quarter. Aerie digital revenue rose 142% and American Eagle’s increased 47%.
- A net loss of $13.8 million compared with net income of $65 million a year earlier.
For its fiscal first half, American Eagle Outfitters reported:
- Net revenue of $1.44 billion, down 25.4% from $1.93 billion a year earlier.
- A net loss of $270.9 million compared with income of $105.7 million a year earlier.