American Eagle Is the Latest Apparel Retailer to Crush Estimates as Teens Head Back to the Mall

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  • American Eagle Outfitters reported Wednesday fiscal first-quarter earnings and sales that topped analysts' estimates.
  • The retailer has not provided a financial outlook for the full year, however.
  • The results follow strong showings earlier in the week from both Urban Outfitters and Abercrombie & Fitch.

American Eagle Outfitters reported Wednesday fiscal first-quarter earnings and sales that topped analysts' estimates, as shoppers spent their money on new styles of denim, summer swimwear, and comfortable bras and underwear from Aerie.

Its shares were down around 1% on the news in extended trading, however, as the company didn't provide a financial outlook for the full year. The stock had closed the day up more than 5%.

The results follow strong showings earlier in the week from both Urban Outfitters and Abercrombie & Fitch. The three retailers' executives are pointing to pent-up demand — particularly among younger consumers — who are eager to get out of the house and socialize again. And as they do that, they want new outfits to don in front of family and friends.

American Eagle had already preannounced in April that its first-quarter sales were on pace to top $1 billion.

Momentum has continued to accelerate into the second quarter, it said Wednesday.

Here's how American Eagle did for the period ended May 1, compared with what analysts were anticipating, based on Refinitiv estimates:

  • Earnings per share: 48 cents adjusted vs. 46 cents expected
  • Revenue: $1.03 billion vs. $1.02 billion expected

American Eagle's net income for the period ended May 1 grew to $95.5 million, or 46 cents per share, compared with a loss of $257.2 million, or $1.54 per share, a year earlier. Excluding one-time adjustments, the company earned 48 cents per share, 2 cents ahead of analyst expectations.

Revenue climbed to $1.03 billion from $551.7 million a year earlier. That beat estimates for $1.02 billion.

Sales at the company's namesake American Eagle brand were up slightly from 2019 levels, it said, at $728 million. While Aerie's revenue surged 89% on a two-year basis, to $297 million.

Jen Foyle, chief creative officer at American Eagle Outfitters and global president of Aerie, said in an interview with CNBC that the company has pulled back on promotions, helping to boost profits. The business also is reacting faster to fashion trends, such as the popularity of high-rise and wide-leg pants, she explained. And it is getting smarter about suggesting other pieces on mannequins in stores and online to complete entire looks.

"We continue to just focus on really getting the outfits [right] and completing the look," Foyle said. "Focusing on tops and dresses and fashion. ... We've really started to attack that, fast."

American Eagle shares are up about 76% year to date.

Shoppers with their Urban Outfitters shopping bags in Soho in New York
Richard Levine | Corbis | Getty Images
Shoppers with their Urban Outfitters shopping bags in Soho in New York

Activewear gives a boost

On Tuesday, Urban Outfitters reported fiscal first-quarter earnings 54 cents per share on revenue of $927.4 million. Analysts had been looking for earnings 17 cents per share on sales of $900.1 million, according to a Refinitiv survey.

The retailer, which also owns Anthropologie and Free People, said sales rose 7.3% from 2019 pre-pandemic levels. Comparable sales on a two-year basis surged 44% at Free People, jumped 9% at Urban Outfitters and rose 1% at Anthropologie.

Demand among women for workout clothes didn't slow down during the quarter either, the company said. It saw an ongoing appetite for athleisure wear, including sports bras and leggings, that can be worn from the gym to the grocery store. Its Free People Movement brand within Free People grew more than 300% from 2019.

Urban Outfitters Chief Executive Richard Hayne said the company is benefiting from shoppers who are "flush with cash" because they haven't been spending on meals out at restaurants, going to movies and concerts, or traveling. Those social activities are gradually coming back, he said, but Urban Outfitters expects demand for its apparel and accessories to remain inflated through at least the second quarter thanks to pent-up shopping.

Stay-at-home clothes still strong

Abercrombie & Fitch, meantime, reported Wednesday adjusted first-quarter earnings per share of 67 cents on revenue of $781.4 million. That came in better than the loss of 38 cents per share and revenue of $687 million that analysts had been looking for.

On a two-year basis, the retailer's total net sales were up 6%. Sales at its namesake Abercrombie brand rose 59.6% year over year, and were up 11% from 2019 levels. At Hollister, sales jumped 62% from the year-ago period, and were up 3.3% on a two-year basis.

Abercrombie CEO Fran Horowitz declined to provide an annual outlook but said second-quarter net sales should be at or above pre-pandemic levels.

The company saw ongoing strength in its denim business and in going-out tops, but also in cozy, stay-at-home wear. According to Abercrombie, spending on the latter category hasn't slowed down, despite many Americans beginning to venture out of the house more frequently and having already spent so much money on sweatpants and pajama sets in 2020.

The investment firm Jefferies said it views Abercrombie, American Eagle and Urban Outfitters, in addition to the off-price sector, as the biggest near-term beneficiaries of a new fashion cycle.

"We see evidence of a burgeoning fashion cycle that should yield multi-quarter benefits, if not longer," Jefferies analyst Janine Stichter said in a note to clients.

Specifically, Stichter pointed to a shift toward consumers favoring wide-legged bottoms over skinny denim and other tight-fitting pants, coming out of the Covid pandemic. As that shift transpires, she said, consumers will need to purchase new tops and different shoes to go with the these kinds of pants silhouettes. The businesses that offer all of these things are positioned to see a spike in sales, Jefferies predicts.

Urban Outfitters' shares closed Wednesday up more than 10%, having risen more than 55% year to date. Abercrombie shares finished the day up nearly 8%, after hitting a 52-week high in intraday trading of $43.90, and are up more than 86% for the year.

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