The 2021 back-to-school season was a test for teen specialty retailers, up against a consumer market hungry for new jean fits, hybrid shopping patterns and ongoing supply chain challenges.
Based on Q3 2021 earning results, executives from two category leaders, American Eagle Outfitters (AEO) and Abercrombie & Fitch (A&F), believe they’ve earned a passing grade.
American Eagle Outfitters
“As I shop our website and walk our stores, I have to tell you, the strong AE heritage we all know and love is back,” said Jennifer Foyle, American Eagle (AE) and Aerie president and chief creative officer, during the company’s Q3 2021 earnings call last week. “The assortment has been refreshed. Our advertising and messaging [have been] reenergized and it’s working.”
AEO executive chairman and CEO Jay Schottenstein said the AE brand is positioned to benefit from the high demand for casualwear—evident in the brand’s back-to-school season, which he said came “rolling back” and “received more than its fair share of growth.”
AE sales in the quarter rose 21 percent compared to 2020 and increased 8 percent to 2019. Foyle said reigniting branded product together with inventory optimization and promotional discipline drove strong AUR (average selling price of an item) growth and merchandise margin expansion.
Denim, Foyle noted, was one of the brand’s biggest strengths during the shopping period, a “clear signal” that AE continues to be a destination for jeans. In fact, the company is closing in on a full year of not promoting denim 365 days a year. The AURs in denim are at record highs. “It’s pretty impressive when you see our ability to sell full price denim,” Foyle said. “And honestly, it’s about time, because the love and the detail and the workmanship that goes into our denim at this price/value equation is like no other.”
Current trends and shifts in silhouettes are playing right into AE’s strengths. While the men’s business saw “tremendous growth” across all categories, the women’s business was supported by the denim category and a focus on outfitting. AE remains the No. 1 brand in women’s denim for all ages and Foyle noted that its female consumer is “aging up” with American Eagle and “growing with us.”
The quarter also saw shopping frequency and spending increase as AEO acquired and reactivated consumers. Michael Rempell, AEO executive vice president and chief operating officer, reported that the company closed the third quarter with the highest active customer count and highest average annual spend since 2010.
Over the past 12 and 24 months, AEO added almost 1.75 million and 2.25 million new customers, respectively. Approximately a third are engaging across both brands and spending approximately two-times that of the average customer annually, he added. And following a successful relaunch last summer, Rempell said the Real Rewards loyalty program for both AE and Aerie has grown with members spending more and staying longer.
Abercrombie & Fitch
Customer acquisition was also a high priority for Abercrombie & Fitch Co.’s family of denim-centric brands Abercrombie and Hollister.
“Our customers were highly engaged as illustrated by our average basket size and lapsed customer rate of return, both of which improved in the double-digit percent range,” said Fran Horowitz, A&F CEO, company’s Q3 2021 earnings call last week. Additionally, the company acquired approximately 2 million new customers globally.
For the three months ended Oct. 30, A&F’s net sales rose 10 percent to $905.2 million from $819.7 million, and were up 5 percent when compared to 2019. Digital net sales rose 8 percent to $413 million, or 55 percent over 2019 comparisons.
In general, the exec said A&F executed well against the back-to-school and fall calendar, providing seasonally appropriate newness and outfitting options. The denim category continued to be on fire, posting record breaking Q3 sales. Momentum built for non-skinny styles during the quarter, including the mom, dad, straight and flare for women, while slim, straight and tapered gained popularity for men.
“Importantly, promotions were once again down across brands with higher full price selling,” Horowitz said.
Buoyed by several positive media mentions that have billions of impressions, and thousands of organic social media tags across various platforms, Horowitz said the company was able to highlight its attention to fit, quality and comfort in Q3. “Our marketing teams are leaders in a rapidly evolving digital space and are embracing new and emerging technology trends and engagement opportunities using voices and platforms that are authentic to each of our brands,” she said.
Based on the decade-long skinny jean cycle, Horowitz anticipates that this new phase for denim will carry on for several seasons. “We’ve been seeing such positive response to consumer and he and she both need newness in their wardrobe,” she said. “We expect it to continue for quite some time.”