Source: Company reports/Coresight Research

3Q18 Results

American Eagle Outfitters reported 3Q18 revenues of $1.004 billion, up 4.5% year over year and just shy of the $1.02 billion consensus estimate. EPS was $0.48, even with the consensus estimate and up significantly from $0.36 in the year-ago quarter. Comparable sales were up 8.0%, missing the consensus estimate of 8.8%. American Eagle comps rose by 5%, compared with the consensus estimate of 6%, and Aerie comps rose by 32%, beating the consensus estimate of 28.5%. The company reported that it achieved its 15th consecutive quarter of positive comps and its 21st consecutive quarter of positive comps in both men’s and women’s bottoms. American Eagle Outfitters reported that the Aerie Real bra launch was a success, as customers embraced the product’s fit, technology, style, comfort and expanded size range. The company also reported that apparel was a highlight in the quarter, registering its strongest year-over-year increase, with innovation in tops. The company’s American Eagle ad campaign features real customers and highlights individuality and diverse styles. Management said that it is giving kids a voice and letting them lead the brand, as more young people want to support brands they believe in. Individuality, inclusion and diversity are being incorporated into American Eagle’s brand messaging, and management said that these themes have strengthened customers’ emotional connection to American Eagle, which has driven more frequent shopping and a higher average spend. Management reported that the holidays are off to a good start and that it is optimistic that the company will report a strong quarter. The company reported that it achieved record volumes over Thanksgiving and Cyber Week, when it saw some of its highest traffic levels in stores and strong sales results. American Eagle Outfitters ended the quarter with 941 American Eagle stores, including 142 Aerie side-by-side stores, and 110 Aerie stand-alone stores, five Tailgate stores, one Todd Snyder store and 223 licensed stores. The company announced plans to accelerate Aerie’s growth and open 60–70 Aerie stores in new markets next year, as well as 15–20 American Eagle stores.

Outlook

The company lowered its 4Q18 EPS guidance to $0.40–$0.42 from $0.45–$0.47 previously, based on expected comp growth in the mid-single digits and total revenue growth in the low single digits, versus consensus of $0.47. The company also lowered its fourth-quarter comp and revenue projections, and now expects mid-single-digit comps, compared with high-single-digit comps previously, and low-single-digit total revenue growth, versus last quarter’s mid-single-digit projection.