American Eagle Outfitters Reports Fourth Quarter Results

Aerie revenue up 25%, comp sales up 29%

Digital revenue increased 35%, with Aerie up 75% and AE up 20%

Gross margin expanded 300 basis points, due to higher full-priced sales and reduced promotions

Strong liquidity — reinstating quarterly cash dividend at $0.1375 per share

PITTSBURGH — (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) today reported GAAP operating income of $4 million for the quarter ended January 30, 2021, compared to $0.5 million for the quarter ended February 1, 2020.  Adjusted operating income of $106 million compared to $77 million in last year’s fourth quarter.  The adjusted operating income growth to last year primarily reflected gross margin expansion from higher full-priced sales and lower promotions.

Fourth quarter GAAP EPS of $0.02 compared to $0.03 last year.  Adjusted fourth quarter EPS of $0.39 this year compared to $0.37 last year.

Jay Schottenstein, AEO’s Executive Chairman of the Board and Chief Executive Officer commented, “After an unprecedented year, we ended 2020 on a positive note, with fourth quarter adjusted operating income up 38%, driven by strong margins across brands.  I’m very proud of the entire organization – our teams executed exceptionally well.  We ended the year in a healthy cash position and took bold actions to ensure AEO is well positioned for future success, including steps to right-size and strengthen our store fleet, while also continuing to fuel our robust digital platform.”

“We entered 2021 with momentum, and as reviewed at our January investor meeting, we see significant opportunity to drive Aerie’s growth and deliver strong profit margins in the coming years.  The fourth quarter results reflect progress on our Real Power. Real Growth. plan and provide confidence in our value creation opportunity and multi-year financial targets.”

Adjusted amounts represent Non-GAAP results, as described in the accompanying GAAP to Non-GAAP reconciliations.

Fourth Quarter 2020 Results

  • Total net revenue decreased $22 million, or 2% to $1.29 billion, compared to $1.31 billion last year. Comparable sales declined 1%.  The change in revenue reflected strong online sales, as well as mall traffic declines and store closures related to COVID-19.
  • Aerie revenue increased 25% to $337 million and comparable sales increased 29%. American Eagle revenue decreased 9% to $943 million and comparable sales declined 8%.
  • AEO’s digital revenue increased 35% and store revenue declined 20%. Aerie digital revenue rose 75% and AE increased 20%.
  • Gross profit of $440 million rose 8% from $408 million last year. Gross margin of 34.0% expanded from 31.0% last year.  The increase reflected significantly higher merchandise margins across brands, primarily due to higher full-priced sales, lower promotions and inventory optimization initiatives.  Lower rent expense also benefited the gross margin.  This was partly offset by higher delivery and distribution center costs, due to increased digital mix and higher shipment costs, as well as increased performance-based incentive compensation.
  • Selling, general and administrative expense of $292 million increased $5 million from $287 million last year, reflecting higher performance-based incentive compensation, partly offset by reductions in store payroll.
  • Depreciation and amortization expense of $42 million decreased $2 million from $44 million last year, due to asset impairments taken in recent quarters, as well as lower capital spending.
  • Operating income of $4 million compared to $0.5 million last year. Adjusted operating income of $106 million this year excluded $103 million of impairment and COVID-19 related charges and compared to adjusted operating income of $77 million last year, which excluded $76 million of impairment and restructuring charges.  Adjusted operating margin of 8.2% expanded from 5.8% last year, reflecting higher full-priced sales and lower promotions.
  • Aerie’s operating income increased 17% to $13 million. Adjusted Aerie operating income increased 52% to $48 million and excluded the impact of impairment charges.  American Eagle operating income increased 29% to $92 million.  Adjusted American Eagle operating income increased 29% to $145 million and excluded the impact of impairment charges.
  • Average diluted shares outstanding of 197 million compared to 168 million last year. The increase primarily reflected 26 million shares of unrealized dilution associated with the company’s convertible notes.
  • EPS of $0.02 compared to EPS of $0.03 last year. Adjusted EPS of $0.39 this year excluded $0.36 of impairment charges and expenses related to COVID-19 protocols and $0.01 of non-cash interest expense on the company’s convertible notes.  Adjusted EPS of $0.37 last year excluded $0.34 of impairment and restructuring charges.

Impairment, Restructuring and COVID-19 Related Charges

In the fourth quarter of 2020, the company incurred $103 million in pre-tax impairment and COVID-19 related charges.  Approximately $96 million of the pre-tax charges related to the non-cash impairment of 59 stores and the remaining $7 million reflected incremental expenses related to COVID-19 protocols.

In the fourth quarter of 2019, the company incurred pre-tax impairment, restructuring and related charges of approximately $76 million.  Approximately $65 million of the pre-tax charges related to the non-cash impairment of 20 stores and the remainder primarily reflected severance and other costs.

Inventory

Total ending inventory at cost decreased $41 million or 9% to $405 million.  The decline reflected a 21% reduction in American Eagle, due to inventory optimization initiatives and lower clearance levels.  Aerie’s inventory increased 10% to support strong demand.

Capital Expenditures

In the fourth quarter of 2020, capital expenditures totaled $35 million.  For the full year, capital expenditures were $128 million.  For fiscal 2021, the company expects capital expenditures to be in the range of $250 to $275 million, prioritizing strategic customer-facing and supply chain investments.

Cash Flow and Balance Sheet

The company generated $213 million in operating cash flow during the fourth quarter and $202 million for the full year.  The company ended the period with total cash and short-term investments of $850 million, an increase from $417 million last year.  The quarter-end cash balance included $406 million in proceeds from the April 2020 convertible notes offering.

Quarterly Cash Dividend and Share Repurchase Program

Given its strong balance sheet and liquidity position, AEO’s board of directors has approved reinstating its quarterly cash dividend at $0.1375 per share.  The dividend was declared on March 2, 2021 and is payable on March 26, 2021 to stockholders of record at the close of business on March 12, 2021.  The company has also unsuspended its share repurchase program.

 Conference Call and Supplemental Financial Information

Today, management will host a conference call and real time webcast at 4:30 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8563 or go to http://www.aeo-inc.com to access the webcast and audio replay.  Additionally, a financial results presentation is posted on the company’s website.

Non-GAAP Measures

This press release includes information on non-GAAP financial measures (“non-GAAP” or “adjusted”), including earnings per share information and the consolidated results of operations excluding non-GAAP items.  These financial measures are not based on any standardized methodology prescribed by U.S. generally accepted accounting principles (“GAAP”) and are not necessarily comparable to similar measures presented by other companies.  Management believes that this non-GAAP information is useful for an alternate presentation of the company’s performance, when reviewed in conjunction with the company’s GAAP financial statements.  These amounts are not determined in accordance with GAAP and therefore, should not be used exclusively in evaluating the company’s business and operations.

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About American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 200 international locations operated by licensees in 28 countries. For more information, please visit www.aeo-inc.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release and related statements by management contain forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995), which represent our expectations or beliefs concerning future events, including our long-term financial outlook. All forward-looking statements made by the company involve material risks and uncertainties and are subject to change based on many important factors, some of which may be beyond the company’s control. Words such as “estimate,” “project,” “plan,” “believe,” “expect,” “anticipate,” “intend,” “potential,” and similar expressions may identify forward-looking statements. Except as may be required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise and even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized. The following factors, in addition to the risks disclosed in Item 1A., Risk Factors, of our Annual Report on Form 10-K for the fiscal year ended February 1, 2020 and in our Quarterly Reports on Form 10-Q for the fiscal quarters ended May 2, 2020, August 1, 2020, and October 31, 2020, and in any other filings that we may make with the Securities and Exchange Commission in some cases have affected, and in the future could affect, the company’s financial performance and could cause actual results to differ materially from those expressed or implied in any of the forward-looking statements included in this release or otherwise made by management: the negative impacts of the COVID-19 pandemic and related operational disruptions; the risk that the company’s operating, financial and capital plans may not be achieved; our inability to anticipate customer demand and changing fashion trends and to manage our inventory commensurately; seasonality of our business; our inability to achieve planned store financial performance; our inability to react to raw material cost, labor and energy cost increases; our inability to gain market share in the face of declining shopping center traffic; our inability to respond to changes in e-commerce and leverage omni-channel demands; our inability to expand internationally; difficulty with our international merchandise sourcing strategies; challenges with information technology systems, including safeguarding against security breaches; and global economic, public health, social, political and financial conditions, and the resulting impact on consumer confidence and consumer spending, as well as other changes in consumer discretionary spending habits, which could have a material adverse effect on our business, results of operations and liquidity.

CONTACT:         

Olivia Messina

412-432-3300

LineMedia@ae.com

AEO Signs on As Corporate Sponsor to Open to All

Today, on Zero Discrimination Day, American Eagle Outfitters Inc. is proud to announce its partnership with Open to All to advance diversity, equity and inclusion initiatives.

Open to All is a non-profit nondiscrimination campaign that believes everyone should be welcome regardless of race, ethnicity, national origin, sex, sexual orientation, gender identity and expression, immigration status, religion or disability.

“At AEO we know that every action we take—big or small—can have a huge impact. By pledging our support to Open to All, we affirm our commitment to being a company where customers and associates feel accepted, respected and empowered to be themselves,” said Jay Schottenstein, Executive Chairman of the Board and Chief Executive Officer, AEO Inc. “This is another step forward in AEO’s journey in helping to build a better world for future generations.”

AEO is honored to continue this partnership in 2021 as a corporate sponsor and is committed to maintaining a welcoming and safe environment for all people – including employees, visitors, customers, vendors and clients – and to not discriminate against any individuals or deny them goods or services based on any of these characteristics.

Last March, AEO signed the Open to All pledge to combat racial disparities and discrimination as a result of the COVID-19 pandemic. This pledge encouraged businesses and corporations to work to combat racial disparities and denounce anti- Asian American and Pacific Islander racism in their communities.

In light of the recent wave of violent acts against Asians in America, AEO Chief Inclusion & Diversity Officer, Terry Roberts shared an open letter to associates highlighting AEO’s commitment to stand in solidarity with the Asian and Asian American community and to reiterate AEO’s commitment in ending racism and discrimination.

For more information on Open to All, visit their website here: https://www.opentoall.com/

A Letter to Associates from Terry Roberts, Chief Inclusion & Diversity Officer

We are a family. It is so important that we look after our fellow associates and stand up for the values that make us a great company.  Today, we announced a partnership with Open to All. Open to All is a non-profit organization that believes everyone should feel safe, respected and accepted as they live, shop, and work.

AEO first joined with Open to All last spring when we wanted our associates, customers and communities to know that we stood strongly against the Anti-Asian discrimination that was becoming all-too-common place during this pandemic. It was abhorrent then and beyond upsetting that it has continued into 2021 as many of us have seen the recent acts of violence against those of Asian descent on TV and social media. It is even more hurtful for so many of us that are still processing the violence that we witnessed and spoke out against during 2020.

Times of crisis often bring out the best in people. The way in which AEO rose to the moment in 2020 and acted with caring, optimism and resilience is proof of that.  However, we also know that such moments also bring out those that do not share our values.  Whether it is the acts of hate during this pandemic, or those that occurred against Muslims in the aftermath of September 11th, the scourge of anti-Semitism and so many others throughout our history we all must stand up and show solidarity with those that are facing these attacks.

We will continue to listen to those in the Asian community, including within AEO, to ensure that their voices are centered and we are supporting them not in a performative way, but one which is authentic and meaningful. AEO is an inclusive company that believes in the Power of People.  As we continue to navigate these difficult times, if we walk the road together I am sure the future is bright.

Take care,

Terry

WWD Exclusive: American Eagle Pursues Gen Z With ‘Outer Banks’ Stars and Snapchat

The retailer is launching its spring 2021 campaign today, along with a new augmented reality shopping guide on Snapchat.

By Kellie Ell | Link to article

American Eagle has a few surprises in store this spring — or rather, online.

The retailer is courting youth culture with a new campaign, featuring Netflix’s “Outer Banks” stars Chase Stokes and Madison Bailey, along with an augmented reality shopping guide on Snapchat.

“Gen Z is clearly looking for new ways to shop,” Craig Brommers, American Eagle’s chief marketing officer, told WWD. “This was the next logical experience in our augmented reality shopping partnership with Snapchat.”

The new AE x Snapchat 3D Shoppable Jeans Guide, which launches today, follows what Brommers called “an unbelievably successful” virtual holiday pop-up store with Snapchat. (The brand sold more than $2 million worth of merchandise through the pop-up shop alone and generated about 50 million page views.)

“That told us that there was certainly an excitement and a desire to shop in other unique augmented reality environments,” Brommers said. “So we challenged ourselves and we challenged Snapchat to come up with something around our biggest category, which is jeans.”

With the new technology, Snapchat users can view a range of AE jeans styles and silhouettes, washes, learn new styling tips and see other details close up, including 3D views of how the jeans look on various body types, by twisting the world-facing camera on their mobile devices. In addition, shoppers can make purchases through the app or share style preferences with Snapchat friends.

“It’s taking what has traditionally been a 2D shopping experience on our direct site and bringing it to life through augmented reality and really a 3D experience,” Brommers said.

The decision to partner with Snapchat and the stars of the popular Netflix series also seemed fitting. Brommers said about 50 percent of Gen Zers use Snapchat each day. “This is almost, kind of like, their oxygen in how they connect with their friends these days,” he said. “And wherever Gen Z wants to shop is where you need to go, because if you aren’t innovative, you’ll be left behind.”

The same can be true for cast members of “Outer Banks,” which has quickly become a favorite among many in the same cohort.

“We always push ourselves to be at the forefront of American youth culture,” Brommers said. “And there is no doubt that ‘Outer Banks’ made more of an impact on Gen Z than any other streaming show last year. These are real kids and they really are fans of our brands. Their styles are casual American led by jeans.”

In fact, while Chase Stokes was down in Charleston, S.C., filming season two of the series, he said his “limited wardrobe” included a couple of pairs of American Eagle jeans.

“It’s a brand that I loved growing up,” Stokes said. “For me, it’s about the individuality. I’m big on self-expression, wearing clothes that sort of communicate what you believe in and what you feel comfortable in. A lot of American Eagle’s pieces are also just kind of bright and lively and I love the optimism behind it.”

Stokes was also appreciative of being able to work with costar Madison Bailey on the campaign.

“I’m really proud of being able to do it with a castmate, with Madison Bailey,” he said. “That’s someone who I love and [who I] have spent so much time with over the past two years. And I think that’s how all of these [projects] should go, to work with brands that you love and work with people who you love and curate something that is special and unique.”

The new “Jeans Are Forever” campaign, which both Stokes and Bailey helped shoot, features a range of denim, including jeans and jackets, along with fleece tops, T-shirts and more. Jennifer Foyle, chief creative officer of American Eagle Outfitters and global brand president of innerwear brand Aerie, said the campaign is “meant to uplift our customers and radiate good vibes — encouraging a true sense of optimism, especially now.”

The Snapchat Jeans Guide runs through April 27, but Brommers said there’s more to come from American Eagle.

“What we found with our holiday pop-up is that if we have a number of refreshes throughout the season, there’s a sense of newness and discovery every couple of weeks,” Brommers said. “We’ll come back with something that will be new and fresh for the summer period.”

American Eagle Introduces Jeans Are Forever Campaign Featuring Chase Stokes and Madison Bailey

AE Brand Connects Style and Youth Culture with Launch of First-of-its-Kind AR 3D Jeans Guide on Snapchat

NEW YORK–(BUSINESS WIRE)– American Eagle Outfitters, Inc. (NYSE: AEO) announced today the launch of its American Eagle (AE) brand’s Spring ‘21 Jeans Are Forever campaign, a modern interpretation of a true denim lifestyle. As the #1 jeans brand in America, AE is continuously evolving experiences and products to represent the values of its core customer who is authentic, independent, optimistic, and inclusive. The Jeans Are Forever campaign is headlined by Chase Stokes and Madison Bailey. The collection of images and video was filmed to highlight nature—set outdoors to capture the beauty of green grass and blue skies, and the comfort and style of AE jeans.

This spring, AE will debut the AE x Snapchat AR Jeans Guide, featuring a range of fashion denim for men and women. The first-of-its-kind two multi-URL 3D shoppable jeans lenses will allow users to view different types of 3D AE jeans in augmented reality using the world-facing camera. By virtually twisting or turning each pair of jeans, the customer can learn about specific fits, washes, unique details, get styling tips and click to purchase.

“American Eagle’s Jeans Are Forever campaign is meant to uplift our customers and radiate good vibes—encouraging a true sense of optimism, especially now. We chose Chase and Madison to represent our customers and play up their true personalities in a candid way that felt real to who they are on and off screen,” said Jennifer Foyle, Chief Creative Officer, AEO Inc. and Global Brand President, Aerie. “Great jeans are always in style, and our American Eagle product teams are focused on the continuous development of new fabrics, fits and washes to provide quality and comfort—delivering the best in jeans innovation.”

About the Jeans Are Forever Campaign

  • Chase Stokes and Madison Bailey represent the heartbeat of youth culture with a realness, freedom and limitless possibilities as to what the future may hold. The actors have a great connection on and off screen, and their fun and playful personalities came to life during the shoot.
  • The campaign utilizes a fusion of digital and analog technology and was shot using a mix of cameras: Medium Format, Polaroid, 16mm, Super 8, Tintype, and iPhones.
  • Both Stokes and Bailey are credited as photographers for the campaign as well, each taking a seat behind the lens and capturing the other in their #AEJeans.

Featured Spring ’21 Products

  • A range of fashion denim for her including Mom jeans and shorts. Plus, new leg shapes—flares and denim joggers that compliment the new assortment of on-trend AE tops.
  • Innovation in AirFlex+ for him that offers the most flexible and comfortable styles—perfect to pair with a graphic tee and long or short sleeve wovens in pops of color and patterns.
  • All Mom jeans and Airflex+ jeans in the collection have the Real Good badge, which means they are made with the environment in mind and are manufactured in a facility that meets AEO Inc.’s standards for water recycling and reduction.
  • Easy super-soft layering and the revival of the iconic AE denim jacket for him and her is a must-have item for spring and every season after.

About American Eagle

Since 1977, American Eagle has offered an assortment of specialty apparel and accessories for men and women that enables self-expression and empowers our customers to celebrate their individuality. The brand has broadened its leadership in jeans by producing innovative fabric with options for all styles and fits for all at a value. We aren’t just passionate about making great clothing, we’re passionate about making real connections with the people who wear them. Visit www.ae.com to find your perfect pair of #AEJeans.

About American Eagle Outfitters, Inc.

American Eagle Outfitters, Inc. (NYSE: AEO) is a leading global specialty retailer offering high-quality, on-trend clothing, accessories and personal care products at affordable prices under its American Eagle® and Aerie® brands. Our purpose is to show the world that there’s REAL power in the optimism of youth. The company operates stores in the United States, Canada, Mexico, and Hong Kong, and ships to 81 countries worldwide through its websites. American Eagle and Aerie merchandise also is available at more than 200 international locations operated by licensees in 25 countries. For more information, please visit www.aeo-inc.com.

Contacts

Matthew Owens
SHADOW
Email: Matthew@weareshadow.com

Source: American Eagle Outfitters, Inc.

Business Insider: How American Eagle Outfitters outperformed its peers during the pandemic thanks to ‘distribution nodes,’ body positivity, and TikTok

By Madeline Stone | Link to article

• American Eagle Outfitters has fared relatively well during the pandemic.

• Aerie has fueled a lot of the success with its comfortable clothes and positive brand message.

• The company has made some key changes to its supply chain, too, and it’s evaluating its store fleet.

As the COVID-19 pandemic has upended the retail industry and sent more shoppers online, American Eagle Outfitters has leaned into its social media savvy and strong brand messaging, accelerated its plans to speed up its supply chain, and reevaluated its store base.

It has also managed to grow revenue for Aerie, its intimates, and activewear brand, in the last two quarters despite the impact of the pandemic.

The teen-centric clothing company said during a presentation at its investor meeting on January 21 that it expects total fourth-quarter revenue to be down in the low single digits compared to the same quarter last year. In the third quarter of 2020, which ended October 31, net revenue decreased 3% to $1.03 billion.

Normally a decrease in revenue, even a small one, is not something to celebrate. But these are not normal times — the global fashion industry saw an estimated 30% decline in revenue year-over-year in 2020, according to a McKinsey report written in partnership with the publication Business of Fashion.

Meanwhile, Aerie’s revenue is expected to be up in the high 20% range for the fourth quarter. That level of growth is exceedingly rare in a sector that has been battered by store closures and guest capacity limits during the pandemic. Even in the first quarter of 2020, during which the brand’s stores were largely closed due to the pandemic, Aerie’s revenue decreased only 2%.

The company also unveiled its plans to effectively double Aerie’s sales and grow it into a

$2 billion brand. Aerie has been a large part of American Eagle Outfitters’ recent success. It has a strong brand based in a message of self-empowerment that resonates with young consumers.

But both of American Eagle Outfitters’ brands happen to focus on clothing that is casual and comfortable, which as a category has done less poorly than other parts of the apparel sector during the pandemic. According to data from The NPD Group, total apparel sales fell about 19% in 2020, but sales of sweatpants grew 17%, sleepwear grew 6%, and sports bras grew 10%.

The company has jumpstarted its digital capabilities as well. American Eagle Outfitters’ e-commerce business grew to almost $1.7 billion in sales in 2020 and the company made adjustments to its supply chain and distribution strategies that have allowed it to be more efficient with its inventory and rely less on promotions.

Social media prowess and a brand that resonates with teens

While Aerie’s skyrocketing growth has been a leading topic in conversations about American Eagle Outfitters for a while, the company’s namesake brand still has a lot of cachet on its own, analysts say.

“I wouldn’t underestimate the power of the American Eagle brand,” UBS analyst Jay Sole said. “The American Eagle brand is one of the most powerful teen-focused brands in the country.”

Sole said the firm’s research has indicated that American Eagle has strong global potential as well. Founded with a focus on denim in 1977, the company now has more than 1,000 stores in the US, Canada, Mexico, China, and Hong Kong.

Company executives said during the investor presentation that American Eagle is currently a $3 billion brand.

Authenticity is a key component of the brand identity for both American Eagle and Aerie.

In 2014, Aerie famously stopped the practice of using Photoshop on images of models and advanced body positivity as part of its brand. The company later similarly abandoned Photoshopping for American Eagle, emphasizing individuality and self- expression in its messaging.

The company has also embraced social media platforms like TikTok. In April 2020, it launched a campaign called the #AeriePositivityChallenge, which included sponsored posts from body-positive influencers like Charli D’Amelio, Denise Mercedes, and Iskra Lawrence.

But as Insider’s Bethany Biron reported in January, Aerie has benefited from more organic social media moments.

In November, Hannah Schlenker, a TikTok user with more than 830,000 followers, posted a video of herself wearing Aerie’s “Offline Real Me High Waisted Crossover Leggings.” The post quickly went viral, leading the leggings to repeatedly sell out. Aerie then partnered with Schlenker on a sponsored post in December, featuring her modeling a different set of products.


In July, American Eagle launched a back-to-school campaign that was shot entirely over Zoom and meant to mimic the style of a typical TikTok video.

“They have really used real people to advertise and showcase the product, and that resonates with a lot of younger consumers,” Neil Saunders, managing director at GlobalData Retail, told Insider.

Reworking its supply chain strategy

As part of its response to the pandemic, American Eagle Outfitters also accelerated a supply chain transformation that it had developed in 2019 and planned to roll out over several years. Instead, many of the core tenets of the plan were in place by the beginning of the fourth quarter of 2020, Michael Rempell, American Eagle Outfitters’ executive vice president and chief operating officer, told Insider in a recent interview.

The company set up “distribution nodes” in areas close to large population centers in Los Angeles, Chicago, Boston, and Jacksonville. These centers are smaller than the company’s existing distribution centers in Ottawa, Kansas, and Hazleton, Pennsylvania.

Rempell compared the new strategy to Amazon’s network of fulfillment centers, which enables it to ship out goods to customers quickly.

“That’s the concept that many retailers use for hard goods, or goods that have a longer life cycle and are more predictable, but very few, if any, have been able to prove that concept with fashion,” Rempell said. “We set out to prove that same kind of distribution capability and philosophy with a company that has stores as well as e-commerce.”

Rempell said the company additionally set up new data analytics teams to make decisions about where in its network inventory would be best placed to meet demand.

He said the changes have allowed the company to reduce costs by more efficiently consolidating shipments and by shipping goods from centers closer to where customers live. It has also been able to increase its overall delivery capacity so that it is not too reliant on any particular area and thus vulnerable to disruptions.

Being more efficient with inventory has also helped the company to rely less on promotions.

“What a lot of companies want to do comes down to one word, and that word is speed. Companies want to be able to identify trends and be able to create products that are in line with those trends and get them into their stores faster than they’ve done in the past,” Sole said.

“When they can do that, they’re much better at predicting what consumers want, and they’re much more likely to sell goods at full price.”

Being able to avoid discounting contributes to overall profitability, he added.

Looking towards the future

American Eagle Outfitters’ thinking around its store base has also been evolving.

The company closed 52 American Eagle stores in 2020, and it plans to close between 200 and 250 more in the coming years. Most of those closures will be mall locations, the company said during its investor event.

As of the third quarter of 2020, 302 of American Eagle’s 880 stores in the US and Canada were in “B” malls, while 140 were in “C” malls. Malls are typically graded on the dollar amount of sales their tenants generate per square foot, with “A” being the best grade a mall can get and “C” being the worst.

“There’s really no doubt that some of the malls that American Eagle is in are not going to come back very strongly, and I think that they probably need to address that at some point,” Saunders, of GlobalData Retail, said.

Another challenge for American Eagle is that its focus has long been on denim, a category that has not seen as much sales growth during the pandemic as athleisure and comfort categories have. Company executives said during their presentation in January that the American Eagle brand’s margins have not been as strong in recent years as they should have been.

But, they emphasized, the company wants to lean into its heritage as an authority in denim as consumers’ needs change going forward.

“Styles are going to change, and they are changing, as you’re seeing baggier shapes” of jeans now, Saunders said.

While American Eagle sells a lot of skinny jeans and jeggings, it also has some wider-leg styles like its skater and boyfriend jeans.

If American Eagle can continue to adapt to consumers’ changing style preferences, it has an opportunity to provide the products they want to fill their closets with.

At the same time, the company plans to build on Aerie’s strength and open more stores dedicated to that brand in the near future.

It said during its investor day presentation that it hopes to have 550 Aerie stores by 2023, up from 342 today. About 50 of those stores are slated to open in 2021. These store counts include standalone and side-by-side stores, as well as stores for Aerie’s new sub-brand, Offline.

But, it expects for Aerie to continue to be a digital-first brand. The company said during its presentation that it wants to grow Aerie’s digital penetration, or the percentage of customers who shop on the company’s website or app, from 43% today to more than 50% in 2023.

AEO Black History Month Spotlight: Alex – Aerie Assistant Merchant

Black History Month Spotlight: Alex- Aerie Assistant Merchant

Every February, we honor Black History Month, a time for reflection, rejuvenation and the celebration of the enduring influence of Black people, not only throughout American and Canadian History, but also World History. At AEO, we celebrate Black History Month in a way that reflects the rich diversity of the experiences, culture and contributions of Black people. This month, we will be spotlighting a few AEO associates so they can share why Black History Month is important to them.

Associate Merchant, Alex has been part of our AEO family since 2018. Today she supports the Aerie brand in delivering amazing product to customers, however she wasn’t always on the merchandising career path. We chatted with Alex about her love for Aerie, her favorite products and how she is honoring Black History Month.

Tell us about your role.

I am an Assistant Merchant for Aerie fleece and sweaters. I actually started my career in Inventory Planning through the AEO Teammate Program, but I realized I had a passion for Merchandising. Day in and out, I’m working with our Production, Design and Inventory Planning teams to ensure we’re putting the best product in our stores at the right price.

What’s so special about the Aerie brand?

I love working for Aerie! And AEO as a whole is so inclusive. The Aerie brand really embraces body positivity– that’s why its product and messages have resonated with so many customers. We’ve broken those barriers across the industry. Aerie doesn’t photoshop its marketing images and we have diversity of models- whether that means ethnicity or body types. It’s so awesome to be a part of this incredible team!

So we have to ask, what’s your “go-to” Aerie product?

I’m biased, but I love our sweatshirts! Now that most people are working from home, this is what we are all wearing. I always wear our products, so it makes it even more fun to bring these clothes to life. I am our target customer, so I’m choosing the pieces that I want to wear!

Why are proud to be a Black American?

I’m really proud to be part of a race that continues to show resilience and perseverance time and time again, even though the odds are stacked against us. Knowing and learning the history of my ancestors is so valuable. They have made it possible for me to be here today and that inspires me.

How do you celebrate Black History Month?

Everyone celebrates their own way, but personally, I like to continue educating myself on the history of my ancestors through podcasts or documentaries. Unfortunately, I’ve learned more as an adult than I ever did in school. It’s so important that schools implement better Black history education. I recently finished a great podcast called 1619. It’s about enslaved Africans arriving in what eventually became America. It was super eye opening.

Who is a Black figure who has inspired you?

My grandmother. She grew up in the Jim Crow south and segregation was part of her life. Despite those challenges, she never let it make her feel any less. She has such a strong sense of self, which she learned from her mother. I admire her so much and she has taught me to really understand my worth.

CEO Talks: Jay Schottenstein Reflects on a Lifetime in the Retail Industry

The executive chairman of the board and chief executive officer of American Eagle Outfitters discusses fashion amid the era of COVID-19, the future of retail and what he’s learned in 50-plus years as a merchant.

By Kellie Ell | Link to article

Jay Schottenstein has been able to achieve a rare feat in the era of COVID-19.

The executive chairman and chief executive officer of American Eagle Outfitters Inc. — which includes the American Eagle, Aerie, Todd Snyder and Unsubscribed brands — has led the company through one of the most turbulent times in recent history and secured its place in the post-pandemic fashion world even as competitors close up shop or file for bankruptcy protection.

That’s thanks in part to the strong customer following for Aerie. The innerwear, swimwear and loungewear brand, which recently surpassed $1 billion in revenues, seems well suited to the times, with its work-from-home fashion and comfortable attire. It was also the first intimates brand to celebrate body diversity.

Schottenstein had the foresight to recognize this, long before it was fashionable. The seasoned retailer has demonstrated the ability to see opportunity in times of crisis. In the last year, in the middle of the global health crisis, American Eagle Outfitters launched two brands: The slow retail concept called Unsubscribed and the Aerie activewear subbrand Offline. The company was also quick to adjust its distribution methods while the U.S. was in lockdown, using regional distribution centers and pulling inventory out of stores to fulfill e-commerce orders, all of which dramatically cut costs.

But while other retailers continue to permanently shutter brick-and-mortar locations, Schottenstein believes in the value of physical retail. American Eagle Outfitters is planning to add to its store fleet in the next few years with more Aerie, Offline, Todd Snyder and Unsubscribed locations.

Investors seem pleased with American Eagle Outfitters’ momentum, too. The stock is up more than 70 percent, year-over-year.

Now the retailer is embarking on its next leg of expansion, with Schottenstein at the helm. At last month’s Investor Day, the company laid out new growth goals, including hitting $5.5 billion in total group revenues by 2023 ($2 billion at Aerie alone), $550 million in operating income and returning the American Eagle brand to profit growth over the next three years.

Meanwhile, the U.S. is ushering in a new era with President Joe Biden in office and continues to navigate its way through the pandemic. The usually quiet Schottenstein sat down with WWD last month for an exclusive interview to discuss his strategies for growth, the state of retail, the future of the mall in a digital-first world and how the industry has changed in his 50-plus years as a merchant.

The following has been edited for clarity and condensed.

WWD: You’ve had a great year. What’s the secret to your success? 

Jay Schottenstein: I think two things that really made us so successful were that we were really focused on developing the Aerie business, expanding the Aerie business and growing the Aerie business. And taking advantage of this market time with the casual and with everyone staying home. And also, refining American Eagle Outfitters at the same time, with American Eagle stores and really pushing the denim in a really strong manner.

WWD: With the inauguration [of President Joe Biden], and as a business owner, how do you gauge consumers’ preferences? Looking at politics through the eyes of a business owner, how do you know what to expect from customers in this political environment? 

J.S.: I don’t think today is going to change anything in that way. I think the biggest change is getting this pandemic under control, getting the virus under control, seeing the numbers go down, not going up and really getting more people vaccinated. In America, the only thing that’s going to make a big difference is the vaccination; how fast can we get the country vaccinated in order to get the herd immunity?

WWD: So you’re not as concerned about political unrest as a business owner?

J.S.: I don’t think so. Look, what happened…at the Capitol [with the mob insurrection] is unacceptable. It’s not the way to make change in this country. American people have always been peaceful people. And I hope that will continue. We have to have good communication amongst the people. And, look, there have been different times [throughout history]. I grew up during the Vietnam time, with protests there. People were worried about what’s going to happen with the country. The country survived. And I feel the country will survive this [era], too.

WWD: You’ve been in retail a really long time. What are your thoughts on specialty retail going forward? Do you think the future of retail is in malls? Online? Or somewhere in between? 

J.S.: Brick-and-mortar is not going anywhere. It’ll still be here [in the future]. But today, it’s really the experiences that you have between the channels. You have to have a strong online business, a strong presence in your brick-and-mortar. But it all has to be one.

At American Eagle, we work very hard. We’ve made a lot of investments into our digital ability and also at our store level. We have the ability to do curbside pickup. You can order in the store and pick it up in the store. Or we’ll bring it to your car. At the same time, if you buy online, we work very hard to make sure the merchandise gets there in a timely fashion.

This past year, it’s been a very innovative year for us. We opened up these [regional] warehouses around the country, where we could get faster service and get quicker service to the stores and give quicker service to the customers at the same time, too. And where many retailers were experiencing difficulties this fall, because of what was happening between UPS and Federal Express, we were able to avoid those problems, because we had the ability — and not just to use Federal Express or UPS. We could use regional deliverers at the same time.

WWD: Do you think the future for retailers, all fashion companies, is that they’re going to need to have regional distribution centers? 

J.S.: They’re going to have to. Look, today, in retail, you have to do it all. You have to make sure you have good logistics, you speak to the customers the right way, you can communicate through all the different channels and, at the same time, you can’t lose focus. You have to have good merchandise. You have to have good fashion. It has to be styled right. It has to be made right. It has to be good quality. And it has to have all the bells and whistles.

It’s not the old days; you open a store and put merchandise on the shelves. Today, in our business, what we’ve done is truly an amazing feat. We had to operate in certain states at 25 percent capacity. In California, you’re only allowed 25 percent capacity [in terms of] the amount of people allowed in stores, compared with how many people are normally allowed in stores. And the rest of the country is 50 percent capacity. So we’re running our stores on social distance protocols.

We’ve done that since the day we reopened back in May. We’re enforcing it ourselves. We believe it’s for the safety of our associates. It’s for the safety of the customer. We’re the only store that gives out masks, still, in the store. You have to wear masks to go into our store. And, at the same time, we’re running on 30 percent less inventory at the store level. Because we had to take fixtures out of the store and tables out of the store, in order to be able to give that social distance to the customer. So we’re not even working under our normal environment. This is not a case where we reopened our stores [under normal circumstances].

We reset all of our stores. And by resetting the stores, we had to put less merchandise in the stores. And not just a little bit less, a substantial amount less merchandise in the store. And in doing this, we’re still driving very good productivity. Our productivity is the best it’s ever been.

That’s the point right there. A lot of people don’t get that. The biggest thing with retail right now is that we’re driving sales with less inventory in the stores and we have to be the most productive that we’ve ever been. And a lot of people forget about that. They’re assuming that stores are open like normal, but they’re not normal. We have different hours than we’ve had in the past. It’s not a normal environment out there that we’re operating our retail stores on. But even despite that, they’re being very productive the way we’re doing it.

WWD: Bigger picture, in terms of investing in businesses and acquisitions, you’ve been in retail a long time — what’s your philosophy in investing in retail companies? How do you know what to look for?

J.S.: Every deal is a little different. It depends. Does it compliment our business? Not compliment our business? Is it a business that’s similar to ours that would fit into our system? What would be the backroom synergy? Does it make sense or not make sense? We just have to look at it as the deals pop up.

WWD: Who are your mentors? Who do you look up to? Or whom did you learn from in the retail industry? Was there one person or many people? 

J.S.: I learned through different people over the years. In the beginning, my father, who was a great teacher. A gentleman who trained me since I was 16 years old. I learned through different facets.

I started in the furniture side of our business. And that’s been since I was 15 years old. I grew up from — really from my first 15 years in the business — I was really more on the furniture side. Then in my mid-30s I got involved in our department stores and that got me involved in the soft goods. At the same time, I was learning [from] our furniture stores, where we have more than 100-plus furniture stores. It’s called American Signature Furniture, which we’ve been operating since the late 1940s.

And then we have the department stores that I was in charge of. My father passed away in the early 1990s and then I became in charge of American Eagle, back in ‘91, ‘92. But back in those days, I had a major chain of department stores; I had a major chain of furniture stores. I ran two at the same time, as well as building shopping centers. And also running an asset recovery business. I probably ran more liquidation sales than anybody in the country.

WWD: In terms of international expansion, where do you see the American Eagle and Aerie brands going first? Are there certain countries that you’re targeting? 

J.S.: We’re already international. But a small part [of our business] is international. We’re in Canada. We’ve been in Canada for many years. It’s really part of the North American business.

In the last couple of years we’ve been doing more major expansion into Mexico. It’s been becoming more of a major business. We have stores in South America that we’ve expanded into. We’re in the Middle East. We’re in Israel with 40-something stores. We’re in the rest of the Middle East: Dubai, Saudi Arabia, those countries over there.

We have stores in Hong Kong. We have stores in Korea, Japan and in China, too. And look, China is a major, major market and we only have a few stores for now. But there’s a big opportunity there. And now we just opened stores in India, too. And we still have Europe open to us. We still have Western Europe open and Eastern Europe open for us. So there’s tremendous opportunity in the next couple of years. The international will be over a billion-dollar business. And it’s very close to that right now.

WWD: In terms of Unsubscribed and Todd Snyder, are there plans to open more stores in the next year? Or in the future? 

J.S.: Yes, there is. Hopefully this year we can open close to five. Our goal this year, for Todd Snyder, is to get five stores open. And for Unsubscribed we’re looking for a few more stores. But our biggest expansion will be the Aerie stores and Offline.

WWD: What changes are you expecting to see in fashion and retail industries once the pandemic is over?

J.S.: You know what it comes down to, I think we still have, realistically, the next three months are not going to be pretty months in this country, until we get the people vaccinated. They’re predicting the next four weeks a tremendous amount of deaths in this country. It’s going to continue the way it’s been going.

I think when we get toward later spring, summertime, we’re going to start seeing the blue sky. It’s going to take people a little time to get comfortable going back to what they perceived as their previous normal, if they ever go back to that. I think it’s going to take a while for people to get comfortable flying commercial airlines again, traveling again and feeling comfortable. But they do feel comfortable wearing denim. They do feel comfortable wearing comfortable clothes. And from that standpoint that will continue. And then we’re probably a year away from when we could go into the Roaring Twenties.

We all have to pray these vaccines work. God forbid this thing doesn’t work, [then] we don’t know what we’re in for. But I’m optimistic. Right now, it looks very good.

WWD: In terms of three-year growth strategy, what are your top priorities?

J.S.: Our top priorities, very simple: the growth of Aerie, number one. Boom. We’re going to continue the growth of Aerie. And that’s with Offline. Our goal is to go from $1 billion in the next three years to $2 billion in three years. Grow that by $1 billion.

We see a big opportunity in American Eagle to reignite American Eagle’s growth and profit at the same time. We believe in American Eagle, we have a lot of opportunity. There are certain things we do very well at American Eagle. Our denim business, [for example]. When you look at our denim business, you see that between 15- and 25-year-olds we’re number one. And for women’s overall, we’re the number-one women’s brand in the country, in denim. That gives us great potential for our tops business to grow. We see major opportunity there, in American Eagle, that we’re very excited about.

The third thing is that we see that our digital transformation is the right way. We’ve been growing our digital business strong. And we see that opportunity to keep refining that and making us one of the most exciting sites to shop on.

WWD: Do you think there’s a chance you’ll launch more brands? Or acquire more brands in the next couple of years?

J.S.: Look, Offline, I think, could be a major, major brand. We see big opportunity there. And in the next three or four years, there will be other opportunities. But I don’t want to guess what those opportunities are.

I’m sure that there will be opportunities there. There may be a lot of subbrand opportunities for us. Look, I think Todd Snyder can be a very great brand, too. We see a great opportunity in Todd’s area there. So this year we want to get five stores going. And if everything goes well there, that could be a 50-, 60-store chain and be a very strong chain there, too.

And then Unsubscribed has a good possibility. And who knows what pops up, what chains pop up or something that pops up too in the next couple of years. But our main focus — we don’t want to lose our focus — we know we have a big opportunity with Aerie. We’ve got a big opportunity with American Eagle. And if we stay focused on those two, we’ll be very successful just with those two.

We don’t have to add other brands to make us successful. But if the right opportunity comes, that’s a different story. But right now we’ve got such a big opportunity with Aerie and American Eagle that if we stay focused there and we do our thing right and efficiencies and we develop our distribution ability to keep improving that, we will be the winner of the game.

WWD: You guys have been such leaders in the body positivity movement at Aerie. That was years before anyone else saw it. How did you first see that opportunity? How did it first present itself to you? 

J.S.: Jen [Foyle, AEO’s chief creative officer] and the team saw that opportunity there, saw that the woman customer wasn’t necessarily looking to be a fantasy. That people wanted to be themselves. They saw that the climate was changing. That parents and people wanted to feel good about their real selves, not some type of fantasy. And they were able to work with that concept to make people feel good about themselves and not be a fantasy.

WWD: Do you think there’s still space to evolve in the body-positivity movement? 

J.S.: There’s a lot of space, big space.

WWD: There are so many copycats now; so many people trying to do what you’re doing. How do you stay ahead of the competition? 

J.S.: That’s what we tell ourselves every day. That if we don’t keep developing exciting products, new, exciting categories, because [maybe] those other categories are bad — and that’s a big opportunity to keep developing the brand — then somebody else will catch us. So we have to stay ahead of them. A part of being a good merchant is challenging ourselves on a regular basis. Not just saying, “OK we’re here.” We keep evolving. It’s an evolving process. It doesn’t stop.

WWD: What is the biggest lesson(s) that you’ve learned this year throughout the pandemic? And how will you apply them in the future?

J.S.: I think the biggest lesson that we learned, despite everything, is agility. That when everything came shutting down back in March — and we had to close a thousand stores in two days, back in March, and we didn’t have anybody in our offices — we had distribution centers that we had to fight to keep open, because everyone was telling us to shut down. And we had to show that they were essential workers and how important it was to keep these distribution centers open. We learned that agility and to make things happen. And even despite not being on the site, but having the new technologies and learning how to work with these technologies, it gave us a lot of agility. And we can’t lose that agility and that flexibility.

AEO Black History Month Spotlight: Verdell – HR Business Partner

Every February, we honor Black History Month, a time for reflection, rejuvenation and the celebration of the enduring influence of Black people, not only throughout American and Canadian History, but also World History. At AEO, we celebrate Black History Month in a way that reflects the rich diversity of the experiences, culture and contributions of Black people. This month, we will be spotlighting a few AEO associates so they can share why Black History Month is important to them.

With the AE and Aerie brands continuing to see groundbreaking success through digital channels, it’s no surprise that our distribution center teams have continued to grow. Meet Verdell, HR Business Partner in the AEO Ottawa Distribution Center who recently joined the DC team to support with talent acquisition efforts. At the time he was contacted by a member of the AEO recruiting team, Verdell wasn’t actively seeking a new role. But once he met the Ottawa team, he knew he wanted to call AEO home.

You’re new to AEO! What influenced you to join the team?

I was previously working for another retailer and I started to realize how unhappy I was with work/life balance. I have three kids and spending time with them is so important. During the recruiting process as I started to meet the AEO team, I realized maybe it was time for me to make a change so I could prioritize my family again. My first few weeks have been amazing and I really have found that balance I didn’t have before.

Who is Verdell? Share with us some background!

I am 1 of 4 Verdells in my family and I am a former veteran. I enlisted in the Marine Corp at the age of 17 and spent 17 years in the military, traveling the world on combat tours. After my time in the military, I moved into retail. I started as a paint mixer at a home improvement store and within 30 days, I was a department manager. Within 60 days, I was an assistant store manager and eventually managed my own store!

What passions do you hope to bring to your new team?

I am extremely passionate about inclusion and diversity. It is a focus that has been missing for so long and I am thrilled to bring that culture and diversity to the team. At my previous retailer, I was the first Black HRBP—I’m ready to change that in the retail world!

Why are proud to be a Black American?

Why shouldn’t I be? I can’t change who I am – this is how God made me. Black Americans and Canadians before me have persisted through so much in life. I know I make my ancestors proud and that inspires me.

How do you celebrate Black History Month?

I love to recognize and celebrate the achievements of other Black people. I get excited to support my kids with projects at school during Black History Month because every year, there is someone new to learn about!

Who is a Black figure who inspires you/has inspired you through life?

My mom. I was raised in a single parent household and she provided me with guidance and unconditional, motherly love no matter what. She is everything to me and truly my hero!

What do you want people to think about this month?

I want people to know that we shouldn’t be afraid to talk about inclusion and diversity. So many things have happened over the last few years and we need to talk about it, even if it’s uncomfortable. That’s how we make change.

AEO Black History Month Spotlight: Mecca- District Team Leader

Every February, we honor Black History Month, a time for reflection, rejuvenation and the celebration of the enduring influence of Black people, not only throughout American and Canadian History, but also World History. At AEO, we celebrate Black History in a way that reflects the rich diversity of the experiences, culture and contributions of Black people. Over the next several weeks, we will be highlighting AEO associates to share why Black History Month is important to them.

When it comes to the bustling excitement of the retail world, there is no market quite like NYC! Just ask Mecca, AE District Team Leader in the New York metro area, who leads a team of more than 300 associates. Mecca has been part of the AEO team for three years and says the secret to her success is a happy and engaged team. We sat down (virtually) with Mecca to chat about her role and the importance of Black History Month in her life.

What does a District Team Leader do?

My job is to make the store experience the BEST experience for my guests, but most importantly for my team of associates. I am always hyper-focused on my store teams, because when you have a great culture and an engaged team, results speak for themselves – and customers pick up on that energy.

You lead the Inclusion & Diversity efforts for store teams. Tell us about your role and what you hope to achieve?

AEO is doing great work when it comes to I&D initiatives, however we wanted a way to engage our associates and give them a chance to be heard and to take an active role in creating change. That’s why we established the I&D Store Council. This group represents the voice of AE & Aerie store associates – all 35K of them–  and it’s my duty to ensure that feedback is a part of AEO’s corporate I&D goals. That’s the beauty of the I&D work at AEO- it’s truly associate driven!

 Why do you love working for AE?

There is so much optimism in the team and in our customers. I feel like my team and our customer ARE the future and to work for a place where we can help influence and shape the future is unbeatable.

Why are you proud to be a Black American?

Everything from the traditions, the culture, the food – you name it! I attended a Historically Black College and University (HBCU) where I had the opportunity to join an amazing group of women in the Delta Sigma Theta sorority. This group of women have done so much on a national level to give back to communities in need. From critical education and economic development to sending underprivileged youth to college– to witness the impact this group has made is the greatest reward!

What is your favorite thing about Black culture?

I am from Queens so music has had a huge impact on my life. I grew up with east coast hip hop and I still love it, especially Biggie and Jay-Z! There have been so many pivotal musicians who have impacted my life – from Michael Jackson and Anita Baker, to my all-time favorite, Mary J. Blige!

Who is a Black role model who has inspired you in life?

My Aunt Barbara- she was one of the first women in my family to go to law school. She had an extremely successful career in law and was even featured as one of the “DC Women in Politics.” However, she gave up her practice to take care of my grandmother. I will always admire her work ethic and perseverance in her career, but most importantly I admire how she cares for our family and those around her.