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A Look at American Eagle Outfitters’ Q1 2018 Revenue Performance

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Revenues top estimates

On May 31, American Eagle Outfitters (AEO) reported its fiscal first-quarter results. Its revenues of $823.0 million beat the analysts’ estimate of $809.8 million. On a YoY (year-over-year) basis, its revenues were up 8.0%. The momentum in Aerie, AE (American Eagle), and the digital business drove its top-line performance.

Revenues for its digital platform rose 20.0%. Its digital revenues contributed 29.0% to its total revenues, with digital penetration up 300 basis points on a YoY basis. Digital sales are driven mostly by the app and mobile channel, which contribute to more than 50.0% of its sales.

Overall comps increased 9.0% in the first quarter, with AE and Aerie reporting comps growth of 4.0% and 38.0%, respectively. Store comps were up in the mid-single digits. Comps across Canada, Mexico, and Asia were positive. Comps across all regions of the United States were positive in the first quarter, according to the company’s management.

Growth strategies

For Aerie, the company’s management remains confident the brand could exceed $1.0 billion, driven by strength in the intimate apparel category. Aerie’s focus on bralettes and the company’s decision to hire plus-sized models has been well-received by its customers. Its decision to stop retouching the images of models has also been well-received. During the company’s first-quarter earnings conference call, its CEO, Jay Schottenstein, added that the new store design for Aerie has been a success.

Revenues for its American Eagle brand topped $3.0 billion last year, and its management expects the next $1.0 billion to be driven by strength in the bottoms (especially jeans) category. American Eagle Outfitters is also trying to retain customers by improving its loyalty program. The company added that it had witnessed a rise in overall transactions and jeans purchases per member since launching AEO Connected last year.

Peer performance

Abercrombie & Fitch’s (ANF) first-quarter sales of $730.9 million beat analysts’ projection of $695.7 million. On a YoY basis, Abercrombie & Fitch’s sales were up 11.0%, driven by strong international operations, Hollister brand sales, and D2C (direct-to-customer) sales.

Urban Outfitters (URBN) reported first-quarter sales of $855.7 million, which topped analysts’ consensus estimate of $838.1 million. On a YoY basis, the company’s sales were up 12.4% due to strength in its digital business and its three brands—Free People, Anthropologie, and Urban Outfitters.

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