Body-positive trends boost AEO

Teen retailer’s Aerie brand shows growth, but shares still fall

The start of the back-to-school season made one thing clear: a lot of kids are still shopping at South Side-based teen retailer American Eagle Outfitters for jeans.

Sales at established stores — a key indicator that excludes results from stores open less than a year — rose 7 percent for American Eagle and 27 percent for Aerie, the company’s intimates brand selling bras and underwear.

Still, shares were down more than 8 percent midday after management issued a cautious projection for the third quarter.

In the second quarter, American Eagle reported $965 million in total net revenue, up 14 percent from last year. About $40 million is attributable to a shifted retail calendar, company executives said, which moved a week of backto-school shopping to the second quarter.

Earnings per share of 34 cents exceeded analysts’ expectations by 3 cents.

Aerie showed particularly notable growth, CEO Jay Schottenstein said in a conference call with analysts, citing a rapidly expanding customer base. The company’s marketing campaign “AerieREAL” focuses on using models who look more like the average woman, a move that has boosted Aerie’s popularity.

“Anchored on the body-positive movement, we continue to register record growth,” Mr. Schottenstein said.

American Eagle posted quarterly profit of $353 million. CFO Bob Madore noted that tax reform lowered the company’s tax rate nearly 13 percent.

Back-to-school season is typically an important one for teen clothing retailers and others targeting the younger market segment. The National Retail Federation predicted in July that consumers will spend $82.8 billion on back-to-school shopping, from kindergarteners to college students. That’s slightly less than last year’s $83.6 billion.

The trade group noted that roughly 50 percent of back-toschool consumers surveyed said they plan to do a significant amount of shopping online.

Nevertheless, American Eagle is adding brick-and-mortar store locations. The company plans to open 50 to 80 Aerie stores in the next several years, which Aerie global brand President Jennifer Foyle said would include a mix of stand-alone stores and stores next to existing American Eagle locations.

The company is also expanding globally. It recently opened two stores in India and plans further expansion in Asia.

The company’s prediction that third-quarter earnings would be in the range of 45 to 47 cents was slightly lower than analysts’ estimates of 49 cents.

Investors weren’t pleased. At the closing bell, shares were down more than 6 percent to $25.50.