How Has American Eagle Performed In 2016?

Amid a tough retail environment, American Eagle Outfitters (NYSE:AEO) has delivered well this year, with revenue rising 4% year-to-date, and consolidated comparable sales also increasing by the same percentage. While these may seem like modest figures, considering it was on the back of a positive 9% comp last year, it is impressive. The sales growth was driven by strength in the digital business, fueled by rapid growth in the mobile channel.

See our complete analysis for American Eagle Outfitters

American Eagle’s Aerie brand, which is the company’s lingerie and activewear segment, has been performing strongly for the past several quarters. The third quarter of 2016 was another breakout one, with comparable sales increasing 21%, a sixth consecutive quarter with comps over 20%. While weak mall traffic and a soft macro environment have negatively impacted other brands, American Eagle and Aerie have been gaining market share. According to Jen Foyle, Global Brand President of Aerie, the company wants to be “a real player in the intimates sector.” The company’s game-changing campaign in 2014 for its Aerie brand, where the lingerie brand decided to feature only unairbrushed models in its ads, has paid off for the company. The sales increased immensely thereafter (20% growth in FY 2015), and shows no signs of slowing down. As an extension to its #AerieReal campaign, the company in April revealed its #AerieMan campaign, as a parody, featuring a mix of quirky characters of different sizes and personalities sharing their “real life” stories in their skivvies. This marks its pledge to forego retouching even male models in their underwear and swimwear products, beginning Holiday 2016. Such campaigns also generate a lot of online chatter and debate, sparking off a ton of good publicity, increasing their brand loyalty, and thus, helping their business grow. As noted by Foyle, the #AerieReal campaign reached 4 billion media impressions in 2015. The brand’s innovation around the bralettes have continued to see great momentum throughout the year. Additionally, a new yoga-inspired line – Chill. Play. Move. – was also launched to an incredible response in the third quarter. The newly designed stores are also generating productivity at 50% above the older formats. The company is on track with its expansion plans, and will end the year with 10 to 15 such stores, and another 25 by the end of next year.

With growing internet penetration, a consistent customer shift from store to web shopping and the proliferation of smartphones and tablets, American Eagle Outfitters’ direct-to-consumer business has grown rapidly. From $307 million in 2008, the retailer’s direct revenues increased to an estimated $630 million in 2015, according to Trefis estimates. The U.S. apparel industry is gradually shifting towards omni-channel retailing, which refers to providing a seamless shopping experience across stores and the online channel. This is becoming an inevitable move for U.S. apparel retailers, including American Eagle, which is working hard to develop its omni-channel platform and has shown significant progress so far. As is the case with other apparel retailers, AEO is gradually shrinking its store count, and focusing more on the high margin e-commerce channel. A soft and gradual reduction in its brick-and-mortar footprint, as opposed to a large closure in one go, is a good decision as it would not result in a steep fall in its sales. The company’s digital sales registered a 20% growth in FY 2015. This lends credence to its decision to develop its omni-channel presence by investing in digital marketing, and improve its website and mobile app. During FY 2015, the company invested $29.1 million in developing its e-commerce capabilities, and is expected to spend more in FY 2016.

Online retail sales in the U.S. have grown at a rapid pace over the past several years, thanks to growing internet usage in the country. Internet penetration in the U.S. has gone up from 44% in 2000 to 88.5% currently. Furthermore, facilitated by the convenience of constant access, 92% of teens today go online daily, including 24% who are online constantly, according to a study conducted by Pew Research Center. Over half of the teens (aged 13 to 17 years) go online several times a day, aided by the presence of smartphones, which are available to nearly three-quarters of teens. The smartphone usage will only increase in the future, and this will likely result in a steady rise in online sales. This is evidenced by research which predicts online apparel sales in the US to increase its revenue from $63 billion in 2015 to $100 billion by 2019. This segment is considered as the most popular e-commerce category in the US, accounting for 17.2% of total e-retail sales in 2015.

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

• Why Has American Eagle’s Stock Price Fallen Despite Meeting Consensus Estimates?
• Growth Momentum To Continue For American Eagle In The Third Quarter
• What Is American Eagle Doing To Bolster Its Direct Business?
• How Is American Eagle Expected To Perform In 2016?
• How Has the Digital Age Affected Apparel Retailers?
• How Did American Eagle Manage To Improve Its Gross Margins In The Second Quarter?
• Growth In Aerie Helps American Eagle Beat Estimates
• How Will American Eagle Perform In The Second Quarter Of Its FY 2016?
• How Has The Merchandise Mix Of American Eagle Changed Over The Last Three Years?
• Why Will American Eagle’s Aerie Brand Be A Key Growth Driver In The Future?
• Why Are We Bullish On American Eagle?
• What Can Move American Eagle’s Stock Down In The Next Couple Of Years?
• What Is American Eagle Outfitters’ Revenue & Net Income Breakdown In Terms Of Different Operating Segments?
• How Has American Eagle Outfitters’ Revenue Composition Changed In The Last Five Years?
• What’s American Eagle Outfitters’ Fundamental Value Based On Expected 2016 Results?
• Where Will American Eagle Outfitters’ Revenues Come From In The Next Five Years?

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