Victoria's Secret loss is American Eagle Outfitters’ gain as the teen apparel retailer posted better-than-expected second quarter results, fueled by strong demand for its Aerie lingerie brand.
Net income fell to $21.2 million, or 12 cents per share, in the quarter ended July 29, from $41.6 million, or 23 cents per share, in the year-ago period. Excluding restructuring and related charges of $0.07 per diluted share, the company’s adjusted EPS was $0.19 for the quarter, above analysts' estimates.
Revenue rose 3%, to $845 million, topping analysts' forecast for sales of $824 million. Total same-store sales rose 2%, beating analysts' average estimate of a dip of 0.4%. Same-store sales were flat at American Eagle, but jumped 26% at American Eagle's lingerie brand, Aerie.
Anthony Riva, analyst at GlobalData Retail, noted that while the American Eagle brand is still struggling to generate growth.
Aerie continues to power ahead with robust sales uplifts.
"Aerie's fresh take on lingerie – especially in the sense of using ordinary women as models and its body-positive advertising – is still striking a chord with consumers and is allowing it to take custom from other players, including Victoria's Secret," Riva said. "New stores and effective marketing have also helped to drive sales."
American Eagle CEO Jay Schottenstein said that sales trends improved in the second quarter, with continued growth in jeans, bottoms, women’s apparel and Aerie.
"Our brands are strong and we have significant opportunity for further growth," he said. "I’m optimistic as we enter the second half of the year, and we remain focused on delivering product innovation, strengthening customer engagement and improving profit flow-through.”
In the second quarter, the retailer had charges totaling $21 million, approximately $0.07 per share, related to the previously announced initiative to explore the closure or conversion of company owned and operated stores in the United Kingdom, Hong Kong and China to licensed partnerships. Additionally, the company incurred charges related to the planned exit of a joint business venture.
American Eagle operates more than 1,000 stores in the United States, Canada, Mexico, China and Hong Kong, and ships to 82 countries worldwide through its websites.