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American Eagle Beats Estimates as Aerie Sales Soar

By Rich Duprey - Sep 9, 2020 at 10:50AM

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The retailer made best use of its online and direct-to-consumer channels.

Sales and profit margins at American Eagle Outfitters' (AEO 4.93%) lingerie and loungewear brand Aerie took flight in the second quarter helping to propel the retailer to a revenue and earnings beat, though it wasn't enough to lift the apparel company over the year-ago results.

Bird's-eye view

American Eagle said net sales fell 15% year over year to $884 million, but that was due to the 26% decline in sales at its namesake stores. Aerie sales, on the other hand, surged 32% during the quarter, and that was on top of a 22% gain last year.

Aerie models sitting in a green room

Image source: Aerie.

There are 931 American Eagle stores operating compared to 335 Aerie stores, whether stand-alone or side by side to an AE branded store, which accounts for the overall decline. One analyst predicts Aerie will become a $3 billion business in the next five years.

Aerie's sales jump this quarter, though, was driven by its digital revenue, which rocketed 142% higher over the year-ago period. Even American Eagle saw a 47% rise, giving consolidated digital sales a boost of 74%.

While the retailer didn't specify what Aerie's margins were, it noted they hit "record" levels in the quarter.

Because of the coronavirus pandemic, American Eagle Outfitters still isn't providing guidance for the full year, and having suspended its dividend payment back in June, it said it also doesn't expect to resume payments in 2020. Its first-quarter dividend was deferred until April 2021.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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