Sales for both American Eagle Outfitters and Express were up in the second quarter, providing rare good news for the mall-based apparel sector.
American Eagle Outfitters Inc.
In a Nutshell: American Eagle continues to perform, achieving its 10th consecutive quarter of positive comp sales growth. E-commerce remained a standout, now representing 23 percent of overall sales. The American Eagle brand performed well in the quarter, earning record sales in jeans. The men’s category, which had been soft, improved in both bottoms and tops. Aerie saw double-digit sales growth for the 26th consecutive quarter and the brand’s swim and apparel launches exceeded company expectations. Going forward, Aerie will launch a new collection called Real Me and the company will roll out a new rewards program.
AEO operates 1,057 stores, and it will close 25 to 40 stores this year. It opened nine Aerie locations and six American Eagle stores this quarter, two of which were in Mexico. It also opened nine stores abroad through a license and closed three. Five more American Eagle and five additional Aerie stores are slated to open this year across the U.S., Mexico and Canada as well as 32 abroad through licensees.
The company’s third quarter outlook is flat to a low single digit increase in store sales. EPS is expected to be 36 cents to 38 cents.
Sales: Revenue increased to $844.6 million in the second quarter, ended July 29. This was up from $822.6 million in the same period of 2016. Comp store sales were up 2 percent over a 3 percent increase in the same period last year. American Eagle sales were flat, while Aerie experienced a 26 percent increase.
Earnings: Net income decreased to $21.2 million from $41.6 in the prior year period. The company reported EPS of 12 cents for the second quarter, compared to 23 cents during the last year period.
CEO’s Take: “In the second quarter, we achieved sales and earnings above our expectations in a challenging retail environment. Sales trends improved and I’m proud of the continued growth in jeans, bottoms, women’s apparel and Aerie, with encouraging signs in men’s tops beginning to emerge. Our brands are strong and we have significant opportunity for further growth. I’m optimistic as we enter the second half of the year, and we remain focused on delivering product innovation, strengthening customer engagement and improving profit flow-through,” said Jay Schottenstein, chief executive officer.
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Express, Inc.
In a Nutshell: Express achieved the top end of its guidance in both comp sales and adjusted diluted EPS in the second quarter, ended July 30. The retailer has launched a new ship from store initiative and its Express Next loyalty program and credit card signups showed significant growth in the period. It is on track to hit $20 million in cost savings this year and a total of between $44 million and $54 million through 2019.
The company operates 635 stores in the U.S. and Puerto Rico with 503 full-line, 132 outlets and 18 international franchises in Latin America. Express closed 21 stores, converted 19 to outlets and opened four new outlets during the quarter.
Express anticipates negative to low single digit comp sales increases for the third quarter. Net income is expected to fall between $5 and $8 million with diluted EPS of 6 cents to 10 cents.
Sales: Express reported net sales for the quarter of $478.5 million, down 5 percent from $504.8 million in the prior year period. Women’s represents 63 percent of sales while men’s accounts for 37 percent.
Comp sales decreased by 4 percent while e-commerce grew by 28 percent over the same period last year. It now accounts for 19 percent of sales, up from 14 percent from the prior year period.
Earnings: Express posted a net loss of $11.8 million, or 15 cents per diluted share. That compares to a $10.1 million net income, or 13 cents, in the second quarter of 2016.
CEO’s Take: “Our marketing efforts are resulting in improved trends in engagement and we believe they will drive increased customer acquisition and retention. We expect e-commerce sales growth to remain solid and store performance to sequentially improve, driven in part by our expanded omni-channel capabilities,” said CEO David Kornberg. “We remain focused on managing our costs and see clear opportunities to enhance the overall efficiency of our business. Our balance sheet remains strong with more than $170 million in cash and no debt, and we continue to expect to generate solid cash flow.”