Effective Thursday, Deb Henretta is now on the company’s board as an independent director, making the total number of women on the committee three out of eight.
“Deb’s passion for innovation and transforming the customer experience is perfectly aligned with our strategic vision as we continue to grow our leading brands worldwide,” Jay Schottenstein, executive chairman and ceo of American Eagle said in a statement, adding that Henretta’s experience “will add tremendous value to the team.”
“We look forward to benefiting from her insights,” Schottenstein added.
Henretta’s 30-year résumé in the consumer products industry includes a stint at Procter & Gamble as group president of global e-commerce and president of global beauty care. She is also on the board of a number of other organizations, including technology company Corning and real estate firm Meritage Homes.
The seasoned retail executive said she’s “thrilled” to join American Eagle’s board and the chance to work with Schottenstein.
“It will be a privilege to help drive continued growth and momentum of the American Eagle and Aerie brands,” said Henretta, who hopes her experience in branded consumer goods and digital transformation, as well as on other boards, will help shape the customer experience at American Eagle for the better.
“Both American Eagle and Aerie are pushing the boundaries of innovation and speaking to the values of their target customers,” she said.
American Eagle’s existing female board members are Sujatha Chandrasekaran and Janice Page. The addition of Henretta comes at a time when companies are being pressured by shareholders to rethink their top-level talent.
Nike, also no stranger to #MeToo publicity, gave Heidi O’Neill, president of Nike Direct, an updated title the following month. O’Neill, one of Nike’s highest-ranking female executives, is now in charge of not only retail stores and the web site, but also oversees digital products and services.
“Companies are being pressured to diversify,” said Susan Anderson, managing director at financial firm B. Riley FBR. “A lot of it probably has to do with what’s going on politically.”
Still, a lack of female board members throughout the retail industry remains evident. Footwear company Skechers, for example, does not have a woman on its board.
Henretta called her appointment to American Eagle’s board “another terrific sign.”
“It is exciting to see more women earning their way into the boardroom and into leadership positions on these boards,” she said, but admitted that the challenges of creating diverse leadership teams in the retail industry are far from over.
“While there is good progress, there is still more work to be done so that today’s boards and management teams better reflect the diversity of the consumers they serve,” Henretta said.
AEO Appoints Deb Henretta To Its Board of Directors
PITTSBURGH — (BUSINESS WIRE) — American Eagle Outfitters, Inc. (NYSE: AEO) today announced the appointment of Deb Henretta to the company’s board of directors as an independent director, effective February 14, 2019. With this appointment, the company’s board of directors expands to eight directors, including three women.
Ms. Henretta brings an extensive, proven track record of building iconic consumer brands through her 30-year career with Procter & Gamble Company, where she most recently served as Group President of Global E-commerce and President of Global Beauty Care. Previously, Ms. Henretta held a number of executive positions, leading businesses ranging in size from $5 to $20 billion across the globe, including emerging markets. Her end-to-end operating experience includes product innovation, supply chain management, marketing and go-to market strategies.
“Deb’s passion for innovation and transforming the customer experience is perfectly aligned with our strategic vision as we continue to grow our leading brands worldwide. Her wealth of consumer brand experience will add tremendous value to the team, and we look forward to benefiting from her insights,” said Jay Schottenstein, Executive Chairman of the Board and Chief Executive Officer of American Eagle Outfitters, Inc.
Ms. Henretta serves as a Senior Advisor to G100, a C-Suite leadership, learning and development company. She currently sits on a number of boards, including Corning Inc., since 2013; Meritage Homes, since 2016; and NiSource, since 2016. Ms. Henretta also serves on the Board of Trustees at St. Bonaventure University.
Over the course of her career, Ms. Henretta appeared on Fortune’s List of 50 of the Most Powerful Women in Business for seven consecutive years. She holds a master’s degree in advertising research from Syracuse University and a bachelor’s degree in communications from St. Bonaventure.
For more information about AEO’s board of directors, please visit www.aeo-inc.com.
Aerie Continues to Accelerate Growth, Expands #AerieREAL Role Model Family
Busy Philipps, Samira Wiley, Jameela Jamil, Brenna Huckaby and Molly Burke Join Aerie’s Body Positivity and Women’s Empowerment Movement
NEW YORK — (Business Wire) –- American Eagle Outfitters, Inc. (NYSE: AEO) announces that Aerie will expand its #AerieREAL Role Model™ family for spring 2019, continuing to accelerate the growth of the lifestyle brand and strengthening its commitment to body positivity. Actor, The New York Times bestselling author and host of E!’s late night show BUSY TONIGHT Busy Philipps, actress and activist Samira Wiley, actor, writer and activist Jameela Jamil, gold medal para snowboarder Brenna Huckaby and creator Molly Burke will join current Role Models Iskra Lawrence, Aly Raisman, Cleo Wade and Jenna Kutcher in Aerie’s ongoing mission to empower its customers.
“The #AerieREAL Role Models are a source of inspiration for our customers and women around the world,” said Jennifer Foyle Aerie Global Brand President. “These amazing Role Models embrace the Aerie lifestyle and were chosen for their influential voices, unique stories and commitment to nurturing an inclusive, empowering community for Aerie women everywhere.”
The #AerieREAL Role Model ’19 campaign will feature real conversations around body confidence and social causes at stores across the country. Role Models will share their stories and create awareness for the causes they stand behind by appearing in unretouched images and videos in stores, online and through social marketing.
The new #AerieREAL Role Models share first-hand what being part of the campaign means to them:
“Aerie’s campaign showing unretouched women looking beautiful and empowered help me drive home the message of self-love and confidence that I bestow on my two daughters daily.”
– Busy Philipps
“I am here to wake everyone up the way I had to be woken up. I just want to stop people from feeling the way that I once felt by being beaten up by imagery and messaging that wasn’t real and wasn’t demonstrative of what the real world is. I am here to make change and be surrounded by people and brands who are willing to take risks and push boundaries. ”
– Jameela Jamil
“Finding passion and purpose in everything I do is what drives me and makes me feel fulfilled and happy in my own skin. The Aerie family has truly embraced and celebrated the real me.”
– Samira Wiley
“I wasn’t always comfortable with my body and was afraid of what people would think of me, but I’ve learned when you feel good in your own skin it absolutely shows. I want to help change the stigma behind disabilities and the opportunity to be a part of this campaign helps reinforce to ALL women that there is absolutely nothing that can stop any of us from fulfilling our dreams.”
– Brenna Huckaby
“When my world became dark at age 4, I swore that I would use my voice to shed some light into the lives of others. I strive to be relatable, real, and not show my life as photoshopped and perfect—these imperfections are what make us real and tell our story.”
– Molly Burke
About #AerieREAL™
Aerie is a pioneer within the body positivity and inclusivity movement. In 2014 the brand was among the first to stop retouching models and through #AerieREAL pledged to highlight real women in its campaigns.
In 2016, Aerie announced its first #AerieREAL Role Model, Iskra Lawrence to champion body positivity and inclusivity.
In 2018, Aerie launched a revolutionary 360-degree bra shopping experience that creates a positive and supportive shopping environment to help women feel good about their real selves.
Aerie recognizes there is still work to be done and understands the importance of challenging the stereotypical standards of beauty, which helps give its customers a voice.
###
WWD: Aerie Names #AerieREAL Role Models
Aerie has a new crop of #AerieReal role models.
This time around, the innerwear brand has selected actress and late night show host Busy Philipps, activist and actress Jameela Jamil, actress Samira Wiley, gold medal para-snowboarder Brenna Huckaby and creator Molly Burke. They join Iskra Lawrence, Cleo Wade, Jenna Kutcher and Aly Raisman, bringing the #AerieReal role model count to nine.
“It takes some time because we are really looking for women who are making change in their community,” said Aerie’s senior vice president of marketing Stacey McCormick when asked how they select the role models. “It would be almost impossible to go down to one. These women represent the many facets of what our community is and it allows us to inspire different women through their stories.”
The crux of the marketing campaign, which will appear in stores and on social media platforms, highlights each role model’s power. For Burke, a blind teenage activist, her power is acceptance as she embraces people based on who they are and not how they look. Philipps’ power is authenticity as she’s known for being herself and speaking her truth.
The group of women skews a little bit older than the typical Aerie customer, and McCormick said that was purposeful.
“I think as we grow the brand and our customer base gets bigger, we are really understanding that there is a dynamic in our base,” McCormick said. “We have women who are having kids and raising young women. We are seeing our consumer base broaden and these women represent what our customer represents.”
McCormick said as opposed to just being a face, #AerieReal role models will engage with customers at in-store events titled Real Talks.
“It allows for our customer to see them live and hear them talk on a panel and have the ability to talk to them afterward,” McCormick said. “It continues dialogue and the conversation and now with having more role models we will be able to do more of those.”
In 2014, Aerie announced that it would stop retouching campaign imagery. As a mass retailer, it’s been at the forefront of the body positive message while retailers like Victoria’s Secret have held on to a confined idea of beauty. The approach is working for Aerie. For its third quarter, American Eagle — Aerie’s sister brand — had sales surpassing $1 billion and business was up for Aerie by 32 percent. The team is focused on opening 60 stores in 2019.
“One of our best ways to acquire customers is to open stores,” McCormick said. “We know that she wants the experience. She wants to feel good in our brand and feel like she’s in a safe space.”
Cheddar: American Eagle Finds New Ways to Appeal to Gen Z
American teens are going back to the mall.
Even as e-commerce explodes, and digitally native brands appear to control nearly every segment of retail, legacy mall brands like American Eagle ($AEO) are finding that their most important customers ー teenagers ー are gravitating to an old-fashioned in-store experience.
“Unlike millennials, the majority of Gen Z kids would rather shop in a physical store,” said Chad Kessler, American Eagle’s global brand president. “We’re seeing a return to wanting to interact with people.”
The retailer has found a way to court these customers in a new campaign that, as Kessler explained, takes cues from both the digital and physical worlds. The AE x ME Share Your Style campaign asks American Eagle customers to snap selfies of themselves in AE garb ー whether in their bedrooms or a store fitting room ー and post to social media with the #AExME hashtag. The brand then combs through the photos and curates a selection for its ad campaign.
The company is effectively giving over creative control to its customers, Kessler said. “It’s the customer taking ownership of the brand.”
The campaign reflects the way in which many younger consumers now shop: they’ll browse social media, build an emotional connection with a brand, then head to the store to touch, try on, Instagram ー and then buy the product they first glimpsed online. And this strategy comes from a retailer that’s no stranger to innovative marketing. American Eagle was among the first companies to recognize the desire for authenticity in advertising, launching its #AerieREAL lingerie campaign featuring unaltered photos of “real” women in 2014 ー all while Victoria’s Secret was still parading supermodels down the runway (and losing market share to AE in the process).
American Eagle is, above all, a jeans retailer, Kessler said. The marketing and styles are emblematic of what Gen Z wants in denim, which, he said, has lately been about “mom jeans” and “jeggings” with ever higher waistlines. While the brand tries not to chase trends ー “we’re responding to what our customers search for” ー Kessler said he still pays attention to the zeitgeist. And right now, that includes ー yes ー the lamented return of the low-rise jean.
“Whatever our customer wants, we’ll give them,” he said.
American Eagle Breaks Boundaries With Debut of New Spring ’19 Campaign of Self-Expression and Youth Empowerment
Real Gen-Z Customers Direct, Style and Photograph Spring Campaign to Launch New Creative Direction
NEW YORK – (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) announces that its American Eagle brand is debuting an innovative and first-of-its-kind marketing concept by placing the creative direction in the hands of the customer. With a focus on AE’s commitment to provide its community with a platform for self-expression and empowerment, the spring #AExME campaign was photographed, styled and creatively directed by ten real and authentic Gen-Z cast members.
“As a brand, AE has been a pioneer in collaborating with today’s youth to support self-expression and prioritizing their individuality,” commented Chad Kessler, American Eagle Global Brand President. “This spring, AE is amplifying the voices of our customers by joining forces with a group of inspiring Gen-Zers to help encourage others to share their unique style through our spring collection and Ne(X)t Level Jeans.”
The New #AExME Campaign Concept at a Glance:
All cast members were discovered solely through social media, which is a key avenue for youth expression.
No exotic location or contrived set was used in the campaign, rather the cast is seen in their own personal environments to showcase the endless possibilities in which the AE community can define their individual style.
Instead of enlisting professional photographers and stylists, creativity was taken to the next level through the cast photographing themselves in a series of self-portrait images shot entirely with iPhones and disposable and medium format film cameras.
The AE community can see the campaign come to life across AE’s social media, Google Preferred videos, and via in-store imagery.
Having a platform to amplify their voices, the cast will share their unique stories, passions, diversity and interests with AE fans online and through @americaneagle social channels.
What Makes The #AExME Cast Unique:
Brinda, is a creator and is on a journey of expressing herself and telling her story via art.
Deaunte, is a photographer and visual artist who is passionate about defining what it means to be a young person growing up in an increasingly confusing world.
Thor, from music, to film, to photography, he won’t let you define him.
Antonio, aspires to be a force to be reckoned with in the fashion industry.
Cailee, isn’t afraid to look past the opinions of others to remain true to herself.
Tony, believes that there is one answer to a better world: more love.
Mariana, doesn’t shy away from pushing her own limits and discovering who she is in the form of music and her passions.
Andy, aims to change the world by focusing on happiness and positivity in her photography.
Clare, is going with the flow and discovering new passions when it comes to her photography and music.
Daevin, is on a mission to spread positive energy through his pictures and interactions on social media.
About #AExME:
#AExME is American Eagle’s brand platform, which celebrates freedom, inclusion, empowerment and difference.
The brand’s commitment to individuality encourages customers to express who they truly are by taking the AE merchandise collection and making it their own.
The brand introduced #AExME as a pledge to forgo using models and feature only real customers styling themselves in its marketing.
Follow along with #AExME on social, and www.ae.com/aexme to shop the spring collection.
Adweek: American Eagle Surrendered Creative Control for Its Latest Marketing Effort to Gen Z
The young shoppers shot, styled and starred in the latest campaign
American Eagle is taking the consumer focus group to a whole new level, enlisting a number of Gen Z customers (born between 1995 and 2015) to star in the brand’s latest marketing effort. But wait—there’s more. The brand turned over full creative control to these Gen Z shoppers, giving them the freedom to style and shoot themselves for American Eagle’s Spring ’19 campaign.
“Gone are the days when brands dictated to customers what they should look like, what they should feel like and what they should do to be cool. This generation is cool because they are such individuals and they are so creative and inspiring,” Kyle Andrew, AE CMO, evp of marketing, said.
It’s one thing to let teenagers inform your marketing decisions but a whole different thing to put your entire marketing campaign in their hands. “We want to be inspired by them so we are letting them take control of things that we normally wouldn’t let people take control of,” Andrew continued.
American Eagle is taking the consumer focus group to a whole new level, enlisting a number of Gen Z customers (born between 1995 and 2015) to star in the brand’s latest marketing effort. But wait—there’s more. The brand turned over full creative control to these Gen Z shoppers, giving them the freedom to style and shoot themselves for American Eagle’s Spring ’19 campaign.
“Gone are the days when brands dictated to customers what they should look like, what they should feel like and what they should do to be cool. This generation is cool because they are such individuals and they are so creative and inspiring,” Kyle Andrew, AE CMO, evp of marketing, said.
It’s one thing to let teenagers inform your marketing decisions but a whole different thing to put your entire marketing campaign in their hands. “We want to be inspired by them so we are letting them take control of things that we normally wouldn’t let people take control of,” Andrew continued.
The campaign features nine Gen Zers who all shop at and wear American Eagle. The brand’s marketing team found the faces of its new campaign by scouring social media and searching posts under the #AExMe platform. American Eagle originally launched the platform as a way to find real authentic people that the brand could use in its marketing efforts. Now, the hashtag has become a way for the brand to cast an entire campaign and turn over complete control to young people that embodied the brand and felt like everyday teenagers and young adults.
The cast of Gen Zers used iPhones, disposable and medium format film cameras to shoot their selfies and video used in the campaign. Again, photos were not altered to appear a certain way, something that the brand and sister brand Aerie have been big proponents of in the last few years. Andrew said she really wanted the images to feel authentic so that they’ll resonate with American Eagle’s customer base.
According to Andrew, 80 percent of American Eagle’s shoppers are part of Gen Z, so putting the marketing power in their hands was an easy choice for the brand.
“It seems kind of crazy to me. Especially when you are marketing to Gen Z, I don’t think it is relevant to them to have a brand telling them how to express themselves with their clothes. … They don’t need a 40-year-old white guy sitting in an office telling them how to do that,” Michael Goldberg, AE creative director, said.
Andrew noted that she had two main goals with this campaign. One is to get people (and not just Gen Z shoppers) to think about American Eagle differently. “People have a soft spot in their hearts for American Eagle because it’s a brand that has been around for a long time. It’s been consistent. It makes good quality clothes. People remember it and have a fondness for it. But I want people to really love it,” she said.
The second goal is to get people to recognize the brand as “America’s number one jeans brand. I think people forget how big our jeans business is. I’m hoping that by having cool, young kids with amazing individual style reflecting the more diverse and inclusive community out there and having them wear our jeans that people will start to recognize that we are the authority in jeans for this generation,” Andrew added.
For those tapped to star in the campaign, it gives them a chance to show the world what their generation stands for and what they stand for on an individual level.
One AExME Spring ’19 Campaign cast member, Brinda Iyer, said for her it was a chance to show that “brown women and LGBTQ+ members … can be represented commercially, that the world is changing its lens and their voice matters. I want their parents to know they can be seen in other lanes aside from the ones that are most common, that actively pursuing their dreams within a creative sphere is totally possible if they’re motivated to keep pushing for it.”
AEO Provides Fourth Quarter Update
Quarter-to-Date Comp Sales Rise 6% Reiterates EPS Guidance of 40 to 42 cents Completes Additional 4 Million Share Repurchase
PITTSBURGH — (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE:AEO) today announced that fourth quarter comparable sales to date, through Sunday, January 13, 2019, have increased 6%, following an 8% comp increase last year. The company reiterated its previously issued fourth quarter EPS guidance in the range of $0.40 to $0.42 per diluted share.
In December, AEO repurchased an additional 4 million shares, bringing the year-to-date total to 7.3 million shares repurchased for a total of $144 million.
“Fueled by our leading brands and a favorable customer response to the merchandise collections, I’m pleased to report another record holiday season,” commented Jay Schottenstein, AEO’s Chief Executive Officer. “The teams delivered positive results across brands and channels, demonstrating consistent business performance. We remain focused on driving profitable revenue growth and delivering shareholder value.”
The company will release fourth quarter and fiscal 2018 results on March 6, 2019 and will host a conference call to review financial results on that date.
# # #
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. The company operates more than 1,000 stores in the United States, Canada, Mexico, China 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.
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 fourth quarter 2018 results. 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 the company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2018 and in any subsequently-filed Quarterly Reports on Form 10-Q filed 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 for fourth quarter 2018 and beyond 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 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 changes in global economic 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.
Despite a resurgence in consumer confidence and spending, the specialty apparel segment of retail is a highly competitive space where missteps in marketing, brand message or product can cause shoppers to buy elsewhere.
As a result, retailers must be always on top of their game. For AEO Inc., which has delivered consistent and robust top- and bottom-line growth for the past four years, the recipe for success lies in delivering high product quality, personalized in-store experiences and maintaining brand relevance to its core customers. Here, as part of an ongoing series of executive interviews, Tim Boerkoel, founder of global executive search and strategic consulting firm The Brownestone Group, talks with Chad Kessler, global brand president of American Eagle, about his leadership approach and how the company has succeeded by staying true to the brand and putting customers first.
Timothy Boerkoel: While many brands in the market are struggling, American Eagle is and has been enjoying some positive growth stories. As the brand has evolved, what have you seen change, and what are the points of differentiation you and your team are focused on?
Chad Kessler: Today American Eagle is a $3-plus billion brand with a $1 billion digital business and the leading specialty retail brand for our core 15- to 25-year-old customers. Yet we have a lot of runway ahead. To continue to drive growth, we’ve focused on the classic retail principles of product, innovation, quality and value. That includes putting the customer at the forefront, giving them the products they’re looking for and making sure that we offer the best merchandise in this space. Our jeans business is a great example of where we’ve led with innovation and have clearly set American Eagle apart in the market. We are number one in jeans with our core customers and in second place across all demographics. We got here with a clear focus on our customers and by truly offering the very best style, fit, quality, innovation and value as well as providing them with the best in-store customer experience. American Eagle sells more than $1 billion in jeans annually, and we are focused on building that business further and leveraging our competitive strength to fuel our brand even more.
We also have updated the brand platform to make the customer connection as strong and as relevant as possible. The brand has always stood for inclusion, and we’ve broadened that to incorporate diversity and empowerment. We see in the results that those efforts, combined with our industry-leading products, are driving strong customer response.
T.B.: You’ve shared previously how American Eagle’s consumer base has shifted from being predominantly Millennial to now Gen Z. The brand is not alone in this challenge, but seems to have made the transition quite well. Given that you’ve mostly had youth-oriented customers in your career, how have you managed to capture this fresh new audience most recently?
C.K.: I’m really excited to see the changes that come with the Gen Z customer. I think it’s a great generation whose core values and beliefs are very fortuitously aligned with American Eagle’s. This is a generation that really understands that they have spending power. They want to align with brands that they believe in and that are aligned with them.
Our brand platform of individuality, inclusion, diversity and youth empowerment is well suited to this incoming generation. We’ve really tried to crystallize those values in our “AE x ME” brand platform and have seen success in communicating that to our customers. This generation prefers in-person experiences. They know their money is valuable, and they want to spend it on merchandise that brings both value and quality, but they also want to touch and feel the product. They want to interact with people when they’re researching the product and trying it on. As we further build our store experiences, and consistently lead with the very best product offering, I believe that we will be set up for continued success with Gen Z.
T.B.: So in order to stay relevant to young consumers, physical retail remains a strong focus?
C.K.: Yes, we’ve invested quite a bit in our stores over the last few years, making sure that we have the best associates out in the field that can provide the best experience and customer service and that we’re keeping our more than 1,000 stores attractive and nice places to shop. As we build on the strength of our successful jeans business and expand into lifestyle categories, we are building new store experiences as well as updated fitting rooms. These offer a more seamless experience where the customer can interact with the associate and build outfits and shop for everything they need all in one place. Denim customization in our new stores allows customers to personalize their jeans with unique back patches, and we’ve had in-store events where you can paint, bleach and make the jeans your own in a completely new way.
Overall, we are making the stores more engaging and allowing the customer to have greater impact on both the outfitting and the product. Once they select a product, we empower them to make it their own.
T.B.: As you’ve kept up with the Gen Z customer, have you adapted your personal approach as a team leader? What are some of the internal trends that you’re seeing and capitalizing on?
C.K.: When we talk about this new generation of customers, we know they are looking to have input and some control over brands and products. First and foremost, I believe my role is to build the right team, a team of people who want to engage with our customers and who want to help build the brand vision of American Eagle. Once we have the right players in place, I then have to trust and empower the team and hold them accountable for results and for delivering on the brand’s platform. There’s no way that I can micromanage every decision that’s being made. It would slow us down and not allow for the level of customer engagement and product innovation that is so important. Instead, I focus on building and developing the best team, making sure that we’re marching in the right direction and empowering the team to help further build the brand and drive it forward.
This approach also affects how we think about the customers, too. As I mentioned, this new generation really does want to have an impact on the brand. They want to participate and shop brands where they feel aligned with the values, but they also want to feel like they have a part in creating the brand.
In our marketing, we aren’t casting models in our campaigns anymore. Instead, we have our real customers in the campaigns. We hold in-store contests to engage customers and then we let these real-life customers style their own outfits. They show up to the photo shoot and build outfits that reflect their own styles. This is then reflected in our stores and our marketing campaigns. It’s what “AE x ME” is all about; letting customers express who they truly are in our campaigns. We are turning over control to our consumers in a way that retail has not done in the past. In doing so, we believe we will build a stronger connection to them, and them to the brand.
T.B.: In your other executive merchant roles — specifically at Urban Outfitters, Coach and Abercrombie & Fitch — are there any experiences or learnings that have been incorporated into your current leadership style?
C.K.: I’ve spent my entire career focused on the youth customer, and I find this consumer dynamic and fun. I love being in this ever-changing part of the industry, and I’ve had such great opportunities to work with so many amazing retailers. Working with [American Eagle Outfitters chief executive officer] Jay Schottenstein to build on the success of American Eagle, and having worked with Roger Markfield [chief creative officer of American Eagle Outfitters] in the beginning was just great. Earlier experiences working for Dick Hayne, Lew Frankfort, Reed Krakoff, Mike Jeffries…and the companies they led taught me so much about building brands, making great products, learning from the customer and much more.
What these brands and legendary retailers have had in common is the understanding that it’s all about the product, the brand and the focus on the customer. As the world changes and evolves, sometimes we can get distracted from the core principles of retail. As we think of different channels or various marketing techniques, it always comes back to knowing what the customer is looking for, and offering them the highest quality and value while staying true to your brand.
AEO Reports Record Third Quarter Sales of $1 Billion, Adjusted EPS Grows 30%
Comparable Sales Rose 8%, Marking 15 Straight Quarters of Positive Comp Growth
American Eagle Comps Rose 5%, Aerie Up 32%
PITTSBURGH — (BUSINESS WIRE) – American Eagle Outfitters, Inc. (NYSE: AEO) today reported EPS of $0.48 for the quarter ended November 3, 2018, compared to $0.36 for the quarter ended October 28, 2017, an increase of 33%. EPS of $0.48 increased 30% compared to adjusted EPS of $0.37 last year.
Jay Schottenstein, AEO’s Chief Executive Officer commented, “I am proud to announce another outstanding performance this period for AEO, marking record sales and our first $1 billion third quarter. American Eagle and Aerie had extremely well-executed back-to-school and fall seasons, fueling strong sales across stores and double-digit growth in digital, on lower promotional activity across channels. The holiday season is off to a positive start and I’d like to thank our teams for the exceptional effort and enthusiasm they are bringing to this holiday season. Looking forward, we will leverage our momentum and brand strength as we continue to drive growth and deliver returns to our shareholders.”
Adjusted amounts are based on Non-GAAP results, as presented in the accompanying GAAP to Non-GAAP reconciliation.
Third Quarter 2018 Results
Total net revenue increased $43 million, or 5% to $1.004 billion compared to $960 million last year. As a result of the shifted 2018 retail calendar, approximately $40 million of total net revenue shifted out of the third quarter and was recorded in the second quarter. The shift of revenue adversely affected third quarter operating income.
Consolidated comparable sales increased 8% over the comparable period ending November 4, 2017, following a 3% increase last year.
By brand, American Eagle comparable sales increased 5%, building on a 1% increase last year. Aerie’s comparable sales increased 32%, following a 19% increase last year, marking the 16th consecutive quarter of double-digit comp growth.
Gross profit increased 7% to $399 million from gross profit of $375 million last year. The gross margin rate increased 80 basis points to 39.8% of revenue compared to 39.0% last year. Lower markdowns and rent leverage were slightly offset by increased delivery costs.
Selling, general and administrative expense of $248 million increased 14% from $217 million last year. As a rate to revenue, SG&A rose 220 basis points to 24.8%. The dollar increase primarily supported key investments in our brands, the customer experience and our associates with increases in store payroll, higher wages, and incremental advertising and incentive expense.
Depreciation and amortization expense decreased 2% to $42 million, improving 30 basis points to 4.2%.
Operating income of $109 million compared to $111 million last year, a decrease of $2 million, or 2%. Operating income decreased 5% to $109 million from adjusted operating income of $115 million last year. As a rate to revenue operating income was 10.8%.
Third quarter operating income declined due to the shifted retail calendar as noted above. Year-to-date adjusted operating income increased 14% to $237 million and the adjusted operating margin increased 40 basis points to 8.5% as a rate to revenue compared to the same period last year.
Other income of $4 million includes a benefit from a vendor settlement and interest income. This compares to other expense of $13 million last year due to a discrete charge of $14 million to reserve against a receivable.
The effective tax rate decreased to 24.3% compared to an adjusted rate of 35.1% last year, primarily due to the impact of the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Act”). The company continues to analyze the impact of the Tax Act and provisional amounts will be finalized in the fourth quarter of 2018.
EPS of $0.48 compared to EPS of $0.36 last year. EPS increased 30% compared to adjusted EPS of $0.37 last year.
Inventory
Total ending inventories at cost increased 11% to $592 million. This is primarily due to strong customer demand, the timing of holiday receipts and our clearance store strategy. Looking forward, we expect fourth quarter ending inventory to be up in the mid- to high- single digits.
Capital Expenditures
In the third quarter, capital expenditures totaled $43 million, with more than half related to store remodeling projects and new openings, and the balance to support the digital business, omni-channel tools and general corporate maintenance. We continue to expect capital expenditures to be in the range of $180 million to $190 million this year.
Shareholder Returns, Cash and Investments
During the third quarter, the company repurchased one million shares for approximately $25 million. Through the third quarter share repurchase and cash dividends, the company returned a total of $50 million to shareholders. As a result of strong free cash flow, we ended the quarter with total cash and investments of $360 million compared to $258 million last year.
Store Information
During the quarter, the company opened 5 American Eagle stores and closed 3, ending with 941 stores, including 142 Aerie side-by-side locations. The company opened 2 Aerie stand-alone stores and closed 1, ending with 110 Aerie stand-alone stores. Internationally, the company ended the quarter with 223 licensed stores. For additional store information, see the accompanying table.
Fourth Quarter Outlook
The company expects fourth quarter EPS of $0.40 to $0.42, based on comparable sales in the positive mid- single digits and total revenue growth in the low single digits. This guidance reflects approximately $60 million of lost revenue and $0.07 of reduced EPS due to operating with one less week in the fourth quarter than last year as a result of the 53rd week in fiscal 2017. The guidance assumes a tax rate of approximately 27% due to the impact of recently updated tax reform transition tax legislation and other discrete items. Guidance excludes potential asset impairment and restructuring charges. Last year the company reported fourth quarter EPS of $0.52, which included approximately $0.08 per share of tax benefit. Excluding these items, last year’s fourth quarter adjusted EPS was $0.44. See the accompanying table for the GAAP to Non-GAAP reconciliation.
Conference Call and Supplemental Financial Information
Today, management will host a conference call and real time webcast at 4:15 p.m. Eastern Time. To listen to the call, dial 1-877-407-0789 or internationally dial 1-201-689-8562 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.
