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American Eagle swings to Q2 loss but Aerie continues to soar; closing 40 to 50 stores

American Eagle Outfitters Inc. reported smaller-than-expected second-quarter losses and sales that beat expectations, boosted by intimates brand Aerie.

The company also announced a big promotion for Jennifer Foyle, naming her chief creative officer and adding to her responsibilities as global brand president of Aerie. 

On the company’s earnings call with analysts, CFO Mike Mathias said the company plans to close 40 to 50 stores for the year. The retailer operated 1,098 stores at the end of the quarter.

American Eagle Outfitters’ total revenue fell 15% to $883.5 million in the quarter ended Aug. 1, reflecting the impact of closed stores due to the pandemic. Analysts had expected sales of $823.0 million. By brand, American Eagle’s revenue decreased 26%, following a 1% decline last year. Aerie’s revenue increased 32%, following a 22% increase last year.

Total digital revenue increased 74%. By brand, digital revenue rose 142% at Aerie and 47% at American Eagle.

On the earnings call, chairman and CEO Jay Schottenstein told analysts that the company’s online strength in the quarter was “fueled by new customer acquisition, robust traffic and strong conversions.”

Net losses totaled $13.8 million, or a loss of $0.8 per share, compared to net income of $65.0 million, or $0.38 per share, in the year-ago period. Adjusted losses of $0.3 per share exclude COVID-19 expenses and restructuring charges. Analysts had expected a loss of $0.18 a share.

“In the midst of an unprecedented crisis, we delivered a significant improvement from the first quarter throughout our business – a true testament to the agility, talent and commitment of our team,” stated Schottenstein. “Aerie was simply outstanding, fueled by strong demand, with revenue rising 32% and record margins, demonstrating the power of the brand and signaling the vast opportunity ahead. Across brands, digital sales accelerated and we successfully reopened stores during the quarter.”

Inventory at cost for the quarter fell 21% to $421 million.  American Eagle Outfitters ended the quarter with $899 million in cash and equivalents and nearly $517 million in long-term debt. 

“Throughout this event, we operated with strong disciplines, reduced expenses, cut inventories and carefully managed liquidity,” Schottenstein said. “We controlled what we could, and generated positive free cash flow, strengthening our balance sheet. Inventories are in good shape and I believe we are very well-positioned for the second half of the year. We will remain focused on managing through the near term and preparing for a new future as we accelerate strategies to transform our business and emerge with strength.”

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