American EagleThe two key brands are moving in different directions.
Revenue at the retailer’s namesake banner fell in its fiscal first quarter, even after it ramped up its marketing campaign with actress Sydney Sweeney. Meanwhile, sales of its Aerie lingerie brand soared during the quarter.
Trends at the retailer appeared to disappoint Wall Street, with shares falling more than 10% in extended trading.
In the quarter ended May 2, American Eagle’s comparable sales fell 2%, far worse than the 3.1% growth analysts expected, according to StreetAccount. Meanwhile, Aerie’s comparable sales soared 25%, beating expectations by 19.1%.
American Eagle brand net revenue fell 2% to $678.4 million, while Aerie’s revenue jumped about 34% to $480.83 million.
Combined, the company saw comparable sales grow 8%, below expectations of 8.6%, according to StreetAccount.
“While American Eagle’s results have been mixed, our teams are acting decisively to revive the women’s sector and strengthen product execution and brand positioning,” CEO Jay Schottenstein said in a press release.
“Looking ahead, our priorities are clear. Despite continued consumer uncertainty and macroeconomic uncertainty, we remain confident in our ability to weather near-term headwinds,” he added. “We are focused on operational excellence and disciplined execution to generate long-term value for AEO and our shareholders.”
Here’s how the clothing company performed in the fiscal first quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 14 cents versus 12 cents expected
- Income: $1.20 billion versus $1.19 billion expected
During the quarter, American Eagle reported net income of $23.53 million, or 14 cents per share, compared with a loss of $64.90 million, or 36 cents per share, a year earlier.
Sales reached $1.20 billion, up 10% from $1.09 billion a year earlier.
American Eagle reiterated its full-year guidance and released its outlook for the current quarter. For the year, the company expects mid-single-digit percentage sales growth and gross margin expansion.
In the second quarter, the retailer expects its comparable sales to increase by a mid-to-high single-digit percentage, compared to growth estimates of 6.5%, according to StreetAccount. It expects its gross margin to be down from a year earlier during the period.
During the quarter, American Eagle relaunched its campaign with “Euphoria” star Sweeney ahead of the summer shopping season, but took a calmer approach than the controversial campaign it launched last year under the slogan: “Sydney Sweeney has great jeans.” This time around, instead of cleavage and double entenders, Sweeney was all smiles in a modest, casual beach look.
Although the two campaigns were different, the effect was the same: neither resulted in a major increase in sales of American Eagle’s eponymous banner.
On a call with analysts, Schottenstein said marketing was leading to stronger engagement among new and existing customers, but that going forward the company would “recalibrate its spending” to ensure it gets the best return on investment. Later, president Jennifer Foyle said the marketing had driven “awareness and consideration” and now the company was “focused on conversion.”
During the quarter, selling, general and administrative expenses, which include marketing, rose 11% to $376 million, matching sales growth at Aerie but less at American Eagle. For the second half, the company said it plans to focus more of its marketing investments on social influencers and other forms of digital media, which have a higher propensity to convert, the company said.
Beyond marketing issues, Foyle said the decline in sales at American Eagle came primarily from the women’s bottom segment — a lack of styles shoppers wanted and too many of those they didn’t.
“As marketers, we move quickly when we see opportunities and when we see hiccups. And we’re already making adjustments. As we head into the crucial back-to-school season, we’re refining our bottom architecture, specifically optimizing key silhouettes and risers while leveraging our hunting capabilities to inject novelty,” Foyle said. “At the same time, we are expanding high-demand categories among women’s tops to fully maximize ongoing consumer dynamics. »
Asked how his largest consumer is faring in the face of high gasoline prices and other macroeconomic pressures, Schottenstein said he thinks the U.S. economy is “very strong” and will only get better.
“We think with gas prices, we’re hoping that they’ll start to stabilize very soon, and with the news, we’re hoping that we’ll come to some sort of conclusion,” Schottenstein said. “I hope it will be a very good ending for the world and we are very optimistic about it.”