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Nov. 27, 2020, 7:15 a.m. EST

American Eagle says digital and full-price sales offset lower mall traffic

American Eagle is making plans to shutter stores, which could get them out of low-performing malls

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By Tonya Garcia, MarketWatch


American Eagle Outfitters
American Eagle is rethinking its store fleet, which could lead to many closures over the next several years.

Mall staple American Eagle Outfitters Inc. said traffic was a challenge during the third quarter, but digital sales and full-price purchases drove better-than-expected results.

American Eagle Outfitters /zigman2/quotes/209429711/composite AEO -1.77%   on Wednesday reported net income of $58.1 million, or 32 cents per share, down from $80.8 million, or 48 cents per share, last year. Adjusted EPS of 35 cents beat the FactSet consensus for 34 cents per share.

Revenue of $1.032 billion was down from $1.066 billion in the same period a year ago, but just ahead of the FactSet consensus for $1.029 billion.

Digital sales rose 29%, with online sales at the Aerie brand of underwear and lounge apparel up 83%.

Shares rose 4% in Wednesday trading.

Read: Black Friday 2020 will be a smaller event as retailers spread promotions across the holiday season

“Despite numerous headwinds related to COVID, we saw stronger full-price selling and had limited promotional activity, leading to a meaningful increase in merchandise margin,” said Chief Executive Jay Schottenstein, on the earnings call, according to FactSet.

“Although stores were impacted by negative mall traffic, we continued to outpace the mall with very strong conversion.”

American Eagle executives reminded analysts that the company is taking a closer look at its store fleet, with plans to close 50 stores this year and others over the next several years.

“These stores have been selected based on their lease tenure, mall profile, proximity to other stores and customer engagement levels,” said Michael Mathias, American Eagle’s chief financial officer, on the call.

The Aerie brand, which saw revenue increase 34% during the quarter, opened a new store in October for its Offline brand of activewear. Offline now has four stores.

And early in the fourth quarter, the American Eagle brand launched a collaboration with Walt Disney Co. /zigman2/quotes/203410047/composite DIS -1.15%  .

“The capsule is selling quickly and we are seeing significant engagement on TikTok,” said Jennifer Foyle, global brand president for Aerie, according to FactSet.

Even the good news wasn’t enough for cautious analysts, who raised target prices but not stock ratings.

See: Gap’s Old Navy and Athleta brands are leading the company’s turnaround

/zigman2/quotes/209429711/composite
US : U.S.: NYSE
$ 22.79
-0.41 -1.77%
Volume: 3.68M
Jan. 15, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
2.41%
Market Cap
$3.79 billion
Rev. per Employee
$93,657
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/zigman2/quotes/203410047/composite
US : U.S.: NYSE
$ 171.44
-1.99 -1.15%
Volume: 12.23M
Jan. 15, 2021 4:00p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
$310.39 billion
Rev. per Employee
$320,813
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