American Eagle Outfitters Inc.’s (AEO) plan to bounce back from the pandemic-induced slump is taking shape. The company reported last week that business accelerated across both its American Eagle and Aerie brands, delivering all-time-high first-quarter revenue of $1.03 billion. Though the demand for Aerie’s comfort-driven loungewear and intimates outpaced the American Eagle brand, CEO Jay Schottenstein said initiatives to “reignite” the denim label, optimize inventory, and reduce promotions resulted in a “meaningful recovery in margins, with more runway ahead.”
That runway will likely be paved with denim and tops to match.
In April, Jennifer Foyle, AEO chief creative officer, joined the chorus of voices trumpeting denim’s new cycle, comparing the recent pivot to wider silhouettes to the industry’s game-changing shift to skinny jeans in the early 2000s.
Foyle maintains her positive outlook for the jeanswear category. Though many consumers were sporting sweatpants and joggers last year, the American Eagle teamed identified early signs in the autumn season that wider, looser denim fits were on their way back, she said. “In September, we immediately shifted into these silhouettes,” Foyle said during the earnings call, adding that the shapes are key in both men’s and women’s categories.
Demand across the brand’s jeans and bottoms business remains strong. “With the new denim cycle underway, we are innovating and investing to maintain our leadership position and to offer the absolute best to our customers,” Foyle said. “We continue to solidify our position as the number one brand within our [demographic] and the number one women’s brand across all ages.”
With product lines called 90s Jeans and Skater Jeans, and fits spanning curvy to the ever-popular high waisted, American Eagle seems to have a pulse on women’s denim trends. The team’s ability to test and respond to trends and scale its denim program “is like no other,” Foyle said. “The denim trends certainly exceeded expectations in Q1,” she said. Because of this, she said the brand has completely shifted its mix for the coming season.
Meanwhile, opportunity awaits in the men’s category. Though American Eagle is currently the No. 1 brand in its age demographic (the Active Slim is the best-performing men’s jean), Foyle said new washes that may appeal to an older customer are in the pipeline. “I think we’ll see new customer acquisitions there,” she said.
Along with attracting new customers, Foyle said American Eagle is intent on earning their trust for the long haul. “It’s our job to maintain our market share in denim. We talk about this daily. We want to be the go-to denim destination, not only in this country, but in the world—[there’s] lots of opportunity out there,” she said. “They come to us for our fits, for our quality [and] for our price-value equation.”
American Eagle hopes its focus on “outfitting,” or producing tops that pair back to jeans, will resonate with male consumers as well, and offer both genders a fail-proof solution to getting back into the habit of dressing for social settings.
“Harmonizing the old with the new, we want to leverage our dominance in jeans and focus on more outfitting,” Foyle said. The brand is doing this by fitting its jeans and tops together to test outfits. “Our focus is on getting those outfits right,” she added.
After having its “best quarter ever” in fleece and graphic T-shirts, executives are confident in American Eagle’s tops business, and the back-to-school season may be an optimal time for the company to rev up that engine. “Everything we are seeing on paper is telling us that back-to-school should be great and there will still be some tailwinds there with the new incentives for customer spend,” Foyle said.
“Our strategies to expand into new categories, strengthening product and marketing and fuel our brand platform are having a meaningful impact in our business,” she said. “It’s truly gratifying to see strong sales and customer growth and a very high level of profit flow-through.”