Jay Schottenstein believes he knows what consumers want.
“Today, people want soft; they want to be comfortable. And they want to have quality at the same time, too. And great style with it, too,” the executive chairman and chief executive officer of American Eagle Outfitters told WWD during an exclusive interview. “Our group of merchants have done a fabulous job. They’re very close to the customer. They’re picking up the right trends. And they’re giving the customers what they want.”
As a result, while other specialty retailers are struggling amid the pandemic, American Eagle Outfitters Inc. — the company that includes the American Eagle, Aerie, Todd Snyder and Unsubscribed brands — continues to perform well.
The retailer revealed quarterly earnings Tuesday after market close, showing improvements across the board — especially at intimates and loungewear brand Aerie — despite continued headwinds and a challenging retail environment.
“We held ours, too, during this time,” Schottenstein said, comparing his company to the competition. “We didn’t have the luxury of having the government keeping our stores open. We were forced to close a lot of stores. [But] we protected our associates; we protected our customers. We protected our cash and we protected our company at the same time. At the same time, we had great brands that the customer desires. If anything, I see today as big an opportunity as the company’s ever had.”
That opportunity includes opening additional Offline (there are currently four locations), Unsubscribed and Todd Snyder stores.
“I think people will go back to the stores, but it’s our job to give them a good reason to come back to the stores and give them a good shopping experience,” Schottenstein said.
As of now, the company ended the quarter with 1,105 stores across the portfolio.
Meanwhile, all categories continue to trend well, especially at Aerie.
“All of our categories are firing,” said Jennifer Foyle, Aerie global brand president and AEO chief creative officer. “We really are seeing nice gains in all of our categories in Aerie. And we’ve seen continued momentum going early into [the fourth quarter]. And we’ve had some surprises in holiday. Our leggings are really becoming an amazing, amazing business for us.”
In fact, after TikTok star Hannah Schlenker posted a video wearing a pair of Aerie leggings earlier this month, there were more than 76,000 searches on the Aerie web site looking for the product, with select legging styles selling out.
“We’re just highly focused and highly engaged around our customers and what she needs,” Foyle said. “I don’t think [our success] is the fact that our business is 100 percent curated for these times. It’s because we continue to look ahead and see what’s coming down the pipe from product assortment, marketing, new ideas, new ways of showing up and new ways of keeping our customer interested. It’s never just one thing.
“We’re close to our billion-dollar mark, if all goes well with this quarter,” Foyle added. “That’s a huge milestone for us. We have been focused on that number and we hope to deliver it.”
She added that American Eagle’s denim and men’s top business are also positive growth drivers.
That could be why digital revenues increased 29 percent across the company, or 83 percent at Aerie and 11 percent at American Eagle during the most recent quarter.
Across the portfolio, total company revenues for the quarter were $1.03 billion during the three-month period ending Oct. 31, down slightly from $1.07 billion during last year’s third quarter, with declines found mainly in mall-based stores.
By brand, American Eagle revenues fell 11 percent during the quarter, while Aerie’s total sales surged 34 percent. That’s on top of a 26 percent increase the same time last year. The company registered $58 million in profits as a result, compared with more than $80 million last year.
Post-COVID-19, Schottenstein said consumers will likely take a mixed approach to dressing — a combination of comfy and tailored.
“They’ll have different outfits: they’ll have their dressed [up] outfits and they’ll have their other casual outfits,” the ceo said. He added that all the pent-up demand for social interaction will likely lead to something resembling the Roaring Twenties of a hundred years ago.
“There will be parties going on. People will be socializing. Families will be getting back together. They’ll be visiting each other. People will be out,” Schottenstein said. “But they’re doing it in a cautious manner.”
Headwinds include declines in mall traffic as coronavirus cases continue to rise around the nation, as well as increased constraints on the supply chain during the holidays.
“Certainly [mall] traffic is down. We’re seeing outdoor centers really on an uptick,” Foyle said. “That is a headwind as we think about our store business and operate our stores and making sure that the efficiencies are there. I think we have to be smart with our inventory and that is our play in American Eagle and Aerie. We’re really leveraging the digital channel, making sure that we’re maximizing that, with the right inventories in stores, making sure that we’re getting the best sell-throughs, really managing our promotions, which were down [for the quarter]. And we’re going to continue to focus on that in Q4.”
Schottenstein added that with fewer people traveling, consumers will likely spend more money on their homes and gifting this holiday season.
“I think it’s going to be a good year,” he said. “Everybody wants to go out and celebrate. But how we do it is a different story. People want to spend money buying gifts for everybody to make themselves feel better.”
American Eagle Outfitters ended the quarter with more than $692 million in cash and cash equivalents and $321 million in long-term debt.
Shares of American Eagle Outfitters, which closed down 2.15 percent to $17.79 on Tuesday, are up nearly 20 percent year-over-year.