Sales, profit rebound as American Eagle Outfitters returns to roots
American Eagle Outfitters stabilized sales in a tough market for teen apparel and is upbeat despite not having had a permanent CEO for more than a year.
The South Side-based retailer introduced new spring apparel in January that helped it avoid another quarter of same-store sales declines even as the company cut costs and reduced discounts to sell apparel.
The teen retailer is focused on developing new styles, from women's knit tops to jeans, to distinguish American Eagle clothes from competitors. It will revamp its website this year to be more mobile-friendly while it controls costs in a hyper-competitive market.
The fourth-quarter results reported Wednesday, which showed improvements in sales and profits, highlight a renewed focus at the company, said Eric Beder, an analyst at Wunderlich Securities.
“They have remained true to who they are, which is a denim-driven, fashion-driven brand,” Beder said. “By sticking to what made them strong, American Eagle has really kind of found their niche.”
American Eagle reported that same-store sales were flat in the fourth quarter that ended Jan. 31, a positive development after several consecutive quarters of declines. Same-store sales are an important performance measure, because it shows whether a retailer's revenue gains are from improved management rather than from opening new stores.
Total revenue was $1.07 billion, up 3 percent from $1.04 billion the year before. General and administrative expenses, and other costs related to sales, declined 3.7 percent to $922.8 million.
The company posted a $61.6 million profit, or 32 cents per share, for the fourth quarter, a 486 percent increase from the same period last year, largely because of one-time write-offs that tanked the teen retailer's profits at the end of 2013.
The results put the company ahead of rival Abercrombie & Fitch Co., which said Wednesday that its profit fell by a third, and comparable store sales declined 10 percent. The markets reacted favorably, with American Eagle's shares closing up $1.14, or 7.69 percent, to $15.96.
The relative success at American Eagle underscored the stable leadership despite being without a permanent CEO since the firing of Robert Hanson in January 2014, Beder said.
Interim CEO Jay Schottenstein is a familiar face at American Eagle. He has been chairman of the company since March 1992 and was its CEO from March 1992 until December 2002.
In an earnings call, Schottenstein suggested the company was in no rush to find his permanent replacement.
“I want to make sure that we have the right temperament of the person,” he said. “That whoever we put in this position will bring something to the table, bring something to the plate, and has a certain vision that we buy into. That's what we're looking for, is a person who can bring everyone together and has a vision.”
On Tuesday, the company announced two other executive promotions.
Chad Kessler was named global brand president of American Eagle Outfitters, and Jennifer Foyle was tabbed as global brand president of the company's lingerie brand, Aerie. Kessler joined the company in 2014 as chief merchandising and design officer, and Foyle has been Aerie's chief merchandising officer since 2010.
Those two have helped revamp the company's apparel lines — which Schottenstein said has been a key concern — and their promotions suggest that the company believes it is on the right track, said Simeon Siegel, senior retail analyst at Nomura Securities International.
“I think the best thing you can do is promote from within, because it shows your strategy is working,” Siegel said.
Chris Fleisher is a staff writer for Trib Total Media.
