American Eagle Outfitters Q2 profit jumps amid lowered costs
American Eagle Outfitters reported a mixed second quarter with profit that topped Street estimates but sales that came up short.
Net income totaled $77.26 million, or $0.39 per share, for the quarter ended Aug. 3, compared with $48.57 million, or $0.25 per share, in the year-ago period. Analysts were expecting earnings of $0.38 a share.
Revenue rose 8% to $1.29 billion, below estimates of $1.31 billion. Store revenue rose 7%, while digital revenue increased 12%. Revenue increased 9% at the company’s intimates banner Aerie and was up 8% at its namesake brand.
The company gross profit of $499 million increased 10%, reflecting a gross margin rate of 38.6%. Merchandise margins increased, led by favorable product costs. Gross margin expansion also reflected leverage on expenses, primarily in rent and digital delivery costs.
Operating income of $101 million increased 55%, surpassing company expectations earlier in the year for operating income in the range of $95 million to $100 million. (The increase included an approximately $20 million from the retail calendar shift.)
Earlier this year, American Eagle launched a new strategy to grow profits and sales.
[READ MORE: American Eagle Outfitters Q4 tops estimates; looks to add $700 million in sales.]
“The second quarter marked our sixth consecutive quarter of record revenue and we successfully leveraged our cost base — advancing a number of strategic priorities to fuel growth across brands and channels and drive operating efficiencies,” said Jay Schottenstein, AEO’s executive chairman and CEO. “Our winning formula of outstanding quality and style offered at a great value remains a cornerstone of our brands, positioning us perfectly for today’s consumers. In a dynamic macroeconomic environment, we will remain disciplined and focused on delivering profitable growth and long-term shareholder value.”
The retailer issued guidance for the full year that was slightly lower than analysts had expected. It expects comparable sales to increase approximately 4%, with total revenue up 2% to 3%.
As of Aug. 3, American Eagle operated 1,178 stores.
