Retailers that cater to the younger demographic are trumpeting the role that digital is playing in boosting overall sales.
In reporting first quarter financial results, Urban Outfitters, American Eagle and Abercrombie & Fitch cited digital sales as outperforming traditional brick-and-mortar retailing, as the online and mobile channels continue to gain ground.
Richard Hayne, CEO of Urban Outfitters, speaking on a conference call with analysts, said, “The retail segment comp increased by a very impressive 15 percent. Digital comps outpaced the stores, but both channels delivered double-digit regular price comps.”
Frank Conforti, chief financial officer at Urban Outfitters, speaking on a conference call with analysts regarding a first quarter sales gain of 12 percent, said, “Digital continued to outperform stores posting a double-digit sales increase, driven by increases in average order value, sessions and conversion rate.”
“Free People’s growth was driven by domestic and international growth in department stores, specialty stores and digital businesses. These increases resulted from growth in several categories, including women’s apparel, intimates and FP Movement,” he said, referencing the brand’s active collection.
But digital does not come without a caveat. Conforti noted that while gross profit increased 17 percent from the prior-year quarter to $281 million and an improvement in gross profit rate to 32.8%, “These gains were partially offset by lower initial margins due in part to lower penetration of private label merchandise and deleverage in delivery expense due in part to the increased penetration of the digital channel.”
At the Urban Outfitters brand, where retail segment comps in the first quarter grew 8 percent, Hayne noted that the brand delivered positive comps in both the digital and store channels in North America and in Europe. Within digital, he said “the brand saw nice increases in sessions, AOV [average order value] and conversion with international markets being particularly strong. In China, Urban won the Most Popular Brand for the Young Generation award from Tmall Global.”
He added he feels the biggest opportunities are in digital, wholesale and international expansion.
In digital, Hayne believes Urban has a roadmap for success. “Rapid digital growth has been achieved by offering larger and better product assortments, creating compelling visual imagery and effective marketing and building sites that make digital shopping easier and more enjoyable,” Hayne said. “Our proprietary technology shared by all three brands includes web and mobile platforms that are fast, reliable and scalable.”
The company is leaning into the online momentum with a new marketplace. “This exciting new feature enables a curated assortment of third-party sellers to list and sell merchandise on our brand websites. After a thorough test period, each brand plans to expand its marketplace to include complimentary brands, products and services with a goal of expanding the online assortment offered to the customer and increasing site traffic,” he said.
He noted that other recent site enhancements include the addition of two alternative payment methods, Apple Pay and Afterpay, which allows customers to purchase and receive products and then pay for them over time with no interest charges or credit checks.
American Eagle CEO Jay Shottenstein, also speaking on a conference about first-quarter results, echoed the bullish vibe on digital. “We saw exceptional growth in our digital business, with sales rising 20 percent, marking our 13th straight quarter of double-digit increase. Ongoing investment in technology and omni capabilities are delivering strong returns. The digital business now stands at 29 percent of our business,” he said.
Bob Madore, chief financial officer at AE, responding to a question on e-commerce shipping costs, said, “There are a few levers that we can pull as it relates to shipping expense. One of the bigger ones is we’ve made some significant improvements in reducing our shipments per order… and we’re constantly looking at delivery providers and tweaking our delivery model to combat some of the price increases that we’ve seen.”
Fran Horowitz, CEO at A&F, commenting on a strong overall performance, said, “Our efforts are focused on transforming our operating model to deliver an improved customer experience, with strategic investments in omnichannel experience, marketing, and tools and technology to strengthen our execution and customer engagement. We are off to a strong start in 2018 and we are committed to delivering top and bottom line growth, as we work towards our goal of being a leading global omnichannel apparel retailer.”
The company’s net sales were up 11 percent to $730.9 million, with comparable sales ahead 5 percent. Direct-to-consumer net sales increased 14 percent to $200.7 million from last year and represented about 27 percent of total net sales for the quarter. A&F trimmed its operating loss to $42.2 million from a loss of $69.9 million last year.
At the Hollister chain, Horowitz said that comp sales were up 6 percent in the quarter, with continued strength in North America and Asia. She added Hollister’s marketing efforts have led to high levels of engagement across platforms and programs. “Carpe Now is our most successful campaign to date, with more than 1.5 billion impressions across all platforms and more than 78 million engagements with our content in the first quarter,” she said.