Headlines about consumers curtailing their shopping don’t resonate with American Eagle Outfitters (AEO), according to AEO CFO Mike Mathias.
Though recent sales have been driven by price reductions, Mathias said the brand continues to clear through spring and summer goods and expects to enter back-to-school “clean.” During American Eagle’s Q1 2020 earnings call, Mathias shared how the brand has “seen terrific demand across jeans and shorts” even while stores were closed. Demand is now ramping up for shorts as stores begin to reopen and the weather breaks.
AEO executives, however, are not downplaying the importance of comfort during a time of shelter-in-place orders.
In Q1, American Eagle saw especially strong demand in knit categories that appeal to the trend toward loungewear and at-home apparel, and it has focused on delivering more comfortable wardrobe basics. It also saw a turnaround in women’s tops, which Chad Kessler, president of American Eagle Global, said is the direct result of focusing on “what’s right in this environment and making sure that we have the softest tops” that tie back to American Eagle’s jeans programs.
“And we’re really confident in the newness that we’re delivering for back-to-school,” Kessler added.
Heading into fall, Kessler said he “couldn’t be more excited about the jeans assortment.”
“As you know, we work all year to make sure that we’re going to have the best jeans every back-to-school,” he said. “And with the women’s Dream Jeans and men’s Airflex Plus, I’m confident that the customer will respond positively there.”
Though plans on how to reopen schools in the U.S. come fall remain in flux, AEO CEO Jay Schottenstein is optimistic about the upcoming back-to-school period, too. “I think our merchandise for American Eagle and Aerie…looks great for back-to-school, and for the holiday season that I’ve seen so far,” he said. “I mean, [it] really looks outstanding.”
And comfort will continue to factor into collections. “We will make sure that we have a good balance going into back-to-school and fall, but we are seeing strong demand even across our constructed clothes, which I think speaks [to] certain things about our jeans and our shorts,” Mathias said.
The popularity of these garments, he said, speaks to the innovative fabrics that drive comfort and softness. “You can lounge or be on your WebEx calls in a pair of leggings, or you can be just as comfortable in a pair of jeggings from American Eagle. And I think that’s something our customers would recognize and something they’ll still come to us for,” Mathias said.
“It’s still early days, but we’re encouraged by the trends we’re seeing, specifically the strong recovery at Old Navy, America’s second-largest apparel brand,” said Sonia Syngal, Gap Inc. president and CEO, during the company’s Q1 earnings call. “We attribute this to Old Navy’s advantaged value proposition for the entire family and strength in relevant categories such as active, fleece and denim.”
Old Navy is now operating more than 2,100 stores as mini fulfillment hubs through ship-from-store and more than 500 stores as curbside pickup locations. Additionally, the retailer has welcomed tens of thousands of its employees back to work and expects to have the vast majority of its North American stores opened by the end of June.
Meanwhile, Gap continues to look at merchandising opportunities, but Syngal said the heritage brand will not step away far from its roots: modern American classics. Denim will remain a key part of this narrative. The brand introduced its first teen denim collection during the pandemic.
As one of the largest players in the denim space, Syngal said the brand is “well poised” to drive denim share. “And so, as it relates to denim and Gap, I think that it’s a very important category for the brand and will continue to have an important role,” she said.