Source: Company reports/Coresight Research

Fiscal 2Q18 Results

American Eagle Outfitters reported fiscal 2Q18 revenues of $965 million, up 14.2% year over year and beating the $938 million consensus estimate. Adjusted EPS was $0.34, beating the consensus estimate of $0.31, and up 78.9% from the year-ago quarter. Comparable sales were up 9.0% year over year, beating the consensus estimate of 6.4%. American Eagle and Aerie both posted positive brick-and-mortar comps. By brand, American Eagle reported 7% comparable sales and Aerie posted 27% comparable sales. The digital business grew at double digits for the 14th straight quarter; the digital business represents approximately 24% of total revenues. American Eagle Outfitters reported that it achieved its 20th straight quarter of record jeans sales. The team reported that it is focused on developing the highest quality and newest fabrics. For its Aerie brand, the company reported almost four years of consecutive double-digit growth. Aerie is anchored on the Body Positivity movement and AEO reports that the brand continues to register record growth and market share gains across the intimate space, and is set to reach a brand milestone of $1 billion in sales. The company reported that its third pillar of growth for strengthening and deepening its connection with customers at American Eagle and Aerie is the company’s marketing campaign, AE and Me and AerieReal, which is promoting youth empowerment and diversity. Last, AEO highlighted that it is focusing on a culture of customer-focused selling and elevating in-store experiences. The company reported higher conversion rates and a healthy growth in transactions, and in particular, the new store designs at Aerie are performing well. Stores: American Eagle Outfitters ended the quarter with 939 American Eagle Stores, 131 Aerie side-by-side stores, 109 Aerie standalone stores, one Tailgate store and 223 licensed stores. The company announced plans on its earnings call to open 50–80 Aerie stores within the next 2–3 years.

Outlook

The company raised its EPS guidance for 3Q18 to $0.45–$0.47 from $0.27–$0.29, versus consensus of $0.49. The company expects comps to be in the high-single digits compared to consensus at 3.2% and total revenue growth in the mid-single digits.