Singapore Markets open in 7 hrs 7 mins

American Eagle same-store sales jump, sending the retail stock soaring

Lauren Thomas
American Eagle posted better-than-expected second-quarter sales and profit, boosted by strong demand for its Aerie line of lingerie.

American Eagle Outfitters surprised Wall Street on Wednesday, reporting same-store sales growth for the second quarter.

The teen apparel retailer also posted better-than-expected quarterly revenue and profit, boosted by strong demand for its Aerie line of lingerie.

Shares of American Eagle were last climbing about 7 percent on the news.

"We are particularly encouraged by the progress made in categories like jeans where more emphasis on features like style and fit have helped to boost sales and attract more customers," GlobalData Retail analyst Anthony Riva said in a note to clients.

"Early data suggest that American Eagle did well in denim over the key back to school period."

Comparable sales of American Eagle's Aerie nameplate jumped an impressive 26 percent in the second quarter.

American Eagle's total comparable sales rose 2 percent in the quarter, beating analysts' average estimate of a dip of 0.4 percent, Thomson Reuters said.

Net income fell to $21.2 million, or 12 cents per share, in the second quarter, from $41.6 million, or 23 cents per share, one year ago.

Excluding certain items, the company earned 19 cents per share. Analysts on average were calling for earnings of 16 cents per share, according to a survey by Thomson Reuters.

Revenue increased 3 percent, to $845 million, topping analysts' forecast for sales of $824 million, according to a survey by Thomson Reuters.

Like many of its peers in apparel retail today, American Eagle has struggled to convince more shoppers, especially millennials, to visit its stores and shop its brand. Lucky for the company, it has a strong arm in Aerie.

"Although AEO's results are a little above expectation, they still point to a company that is split in terms of performance," GlobalData Retail's Riva said. "Against this rather somber set of numbers, Aerie continues to glitter."

"Its fresh take on lingerie – especially in the sense of using ordinary women as models and its body-positive advertising – is still striking a chord with consumers and is allowing it to take custom from other players, including Victoria's Secret. New stores and effective marketing have also helped to drive sales"

Even with Wednesday's slight gains, shares of American Eagle have tumbled more than 35 percent over the past 12 months. Over the past three months, though, the stock is up about 8 percent.

Another bright spot in apparel retail

Express shares soared more than 17 percent on Wednesday morning after the apparel retailer posted profit and sales that beat Street estimates.

The company also said that online sales increased 28 percent during the second quarter, and e-commerce now accounts for about 20 percent of Express' business.

"As we look ahead to the second half of the year, we are optimistic about our ability to drive further improved performance in a transforming retail industry," CEO David Kornberg said in a statement.

"Our marketing efforts are resulting in improved trends in engagement and we believe they will drive increased customer acquisition and retention. We expect e-commerce sales growth to remain solid and store performance to sequentially improve, driven in part by our expanded omni-channel capabilities."

Express' total comparable sales, which includes those made online, declined 4 percent, but this was better than a 8 percent decrease during the same period a year ago.

Even with Wednesday's gains, shares of Express have fallen nearly 60 percent over the past 12 months. The stock is down about 38 percent in 2017.

—Reuters contributed to this reporting.