Updated 5:47 p.m. ET May 28
Aerie continued to charge higher in the first quarter, propelling American Eagle Outfitters Inc. to record sales to start off the year.
The label, founded as a subbrand in 2006, pushed first-quarter revenues up 33 percent to $480.8 million with a 25 percent comparable sales increase.
That offset declines at American Eagle division, which saw revenues slip 2.2 percent to $678.5 million. Comps declined by 2 percent.
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All together, the company logged record revenues of $1.2 billion, an increase of 10 percent for the quarter ended May 2. Analysts had a slightly milder $1.18 billion penciled in, according to Yahoo Finance.
That growth helped the bottom line.
Net earnings tallied $23.5 million, up from losses of $64.9 million a year earlier. Earnings per share hit 14 cents, above the 11 cents analysts expected.
Operating income totaled $28 million, ahead of the $20 million to $25 million in the company’s March forecast.
Still, investors were left unimpressed and sent shares of the company down 10.6 percent to $16.02 in afterhours trading.
“This quarter reflected the strength of our portfolio and the power of Aerie,” said Jay Schottenstein, executive chairman and chief executive officer of AEO. “Driven by compelling product assortments and a deep emotional connection with customers, the brand achieved exceptional multichannel growth and profitability, further amplified by the continued relevance of the ‘100% Aerie REAL’ campaign” featuring Pamela Anderson.
Schottenstein described the results at American Eagle as “mixed” and said the retailer was “moving decisively to reignite the women’s business and strengthen product execution and brand positioning.”
American Eagle men’s business turned its third-straight quarter of growth, and women’s Ts and fashion tops were a highlight.
But in the women’s bottoms business, the style and fits were off the mark overall and ran into a cold spring. The retailer said it now has newness on the way in bottoms and is scaling in women’s tops.
While AEO seeks to press its advantage at Aerie and get American Eagle back into form, it’s squaring off in a market that’s not getting any easier.
Inventory at the end of the quarter showed an increase of 27 percent to $817 million from a year ago, with a 5 percent rise in units. That reflected both the impact of higher tariffs and an inventory write-down a year ago.
To draw in more shoppers, the company is ramping up its advertising efforts, which pushed selling, general and administrative expenses up 11 percent to $376 million.
For the full year, the company continues to expect a midsingle-digit gain in comparable sales and operating income of $390 million to $410 million.
On a conference call with analysts, Schottenstein added: “Over the past year, our teams have moved with urgency to strengthen the business and improve execution. And I am proud of the progress we have made. We’re moving with purpose and with a firm understanding where improvement is needed.
“Aerie’s winning formula is its real connection with customers, product positioning and leadership in everyday comfort,” the CEO said. “Offline also continues to be an important long-term growth opportunity as we build awareness and scale the activewear brand across stores, digital and social. Together, Aerie and Offline are powerful brands with growing recognition, our loyal customer, community and significant runway ahead.”
This year, the company plans to close 25 American Eagle doors and open 40 between Aerie and Offline.