How Did American Eagle Manage To Improve Its Gross Margins In The Second Quarter?

+23.13%
Upside
16.77
Market
20.65
Trefis
AEO: American Eagle Outfitters logo
AEO
American Eagle Outfitters

The gross profit of American Eagle Outfitters (NYSE:AEO) increased 8% in the second quarter, to $307.1 million, as compared to $285 million in the corresponding quarter of last year. This increase was primarily a result of improved comparable sales growth of 3% during the period. By brand, American Eagle Outfitters brand comps were up 1%, or $9.2 million, while that of Aerie brand increased 24%, or $13.4 million.

AEO- Q2 Comps

See our complete analysis for American Eagle Outfitters

In relation to total net revenue, the gross profit leveraged 160 basis points to 37.3%. 190 basis points of this leverage was a result of lower costs and higher realized selling prices. This was partially offset by 30 basis points of buying, occupancy, and warehousing costs, due to higher delivery costs related to growth in the direct business.

AEO- Gross Profit

Favorable occupancy and product costs, and more controlled and targeted promotional events by the company, have aided in the improvement of margins. Further, the company expects the margins to continue rising in the near future, despite a competitive environment. This is expected to be achieved through favorable product costs and sourcing efficiencies, and maintaining tight inventories through more strategic and targeted promotions.

Have more questions about American Eagle Outfitters? See the links below:

Relevant Articles
  1. What’s Happening With American Eagle Outfitters’ Stock?
  2. American Eagle Outfitters Q2 Earnings: What Are We Watching?
  3. Rising 9% This Year, What Lies Ahead For American Eagle Stock Following Q1 Earnings?
  4. Will Q4 Results Help Extend The 14% Gain In American Eagle Stock Since Beginning of This Year?
  5. American Eagle Stock Up 32% Over Last Twelve Months, What’s Next?
  6. Can American Eagle Stock Return To Pre-Inflation Shock Highs?

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for American Eagle Outfitters
Interactive Institutional Research (Powered by Trefis):

Global Large CapU.S. Mid & Small CapEuropean Large & Mid Cap |More Trefis Research