Over the past 8 months, we have made significant progress in scaling Quiet Platforms. I guess broadly speaking, knowing what you know, knowing what you have been through, what gives you the confidence for the back half of next year? And at the end of the day, if you don't win in the handling of the merchandise and your cost is deep, early. Q2 2022 American Eagle Outfitters Inc Earnings Call PITTSBURGH Sep 8, 2022 (Thomson StreetEvents) -- Edited Transcript of American Eagle Outfitters Inc earnings conference call or. And then as were looking out to 2023 as far as inventory is concerned. Good morning, everyone. And here we are to deliver. Before we begin todays call, I need to remind you that we will make certain forward-looking statements. If you could talk about that and if there is a shift towards something dressier or maybe pants and how American Eagle might be positioned for that. Today's Change (1.88%) $0.25 Current Price $13.52 Price as of May 8, 2023, 11:13 a.m. In the second quarter, we introduced a new mobile point-of-sale system across our North America store base giving our customers the flexibility to check out or return items through a store associate anywhere in the store. Thank you. And like Jay was saying, it used to be that just if you had great brands, and you had great products, you won. As customers return to stores, we saw a material increase in traffic trends which drove a 73% increase in store revenue versus last year. We have some excitement coming up for spring 2023. But it's going to be -- it's going to differentiate us from everybody, and it's going to be a big opportunity and we're going to get more money for our goods, because it's going to sell or --is that could be as promotional, which is good. American Eagle (AEO) Q2 Earnings Beat Estimates, Revenues Lag Thats great color. We are continuing to rationalize AE store base and closed 7 more stores across the North America fleet in the quarter bringing our regional store count to 858 stores. So for those people, those retailers who are able to get their merchandise on a timely basis, it's going to be a big opportunity. How are you, Janet, by the way. You may proceed with your question. Our next question comes from the line of Kimberly Greenberger with Morgan Stanley. The people we have, the merchants we have are top-notch. Here, we are rebalancing our buys to emphasize the trends that are working very well. Thank you. AEO Investor Relations Yes. Under Jen's leadership, the energized product embarking are yielding results and the timing couldn't be better. I am so proud of what this team has accomplished. Thank you. In the end, for Aerie specifically, we still saw almost doubling the 2019 results, but by the time we got the end of the quarter. But AE is just getting going. Smoothez is our new collection of favorite first layers that we call anti-shape wear. Michael described kind of where we think those are headed. It's going to be something that is the new baseline go forward. Gross profit dollars declined 26% compared to last year. Revenue increased 45% over last year. Digital penetration has also grown to 33% from 24%. This will give us the ability in many markets, able to get same-day delivery to the stores. Good afternoon, everyone. Okay. So when you think about operating margin go-forward, I think we'll be coming out in January talking about and this is just round numbers, 40% gross margin, low to mid 20 SG&A, 3 points to 4 points of D&A, and a new target that's in the low to mid teens we're operating, right. Its going to be profitable, growing nicely. As we grow OFFLINE, we will start to sort of separate the results. She has hit the ground running. I'm also very pleased by the success of our OFFLINE activewear brand which continues to gain traction. Thank you. Image source: The Motley Fool. Demand remains challenging, especially as we cycle an incredibly strong and record back-to-school season last year, with brand revenue down in the high single digits quarter-to-date. Existing customers are transacting more frequently and spending more. But clearly, there's a lot of opportunity with what's happening in supply chain today, there's a lot of disruption. Across channels, stores and digital are firing on all cylinders and driving meaningful profitability. We are the number 1 brand between the 15 to 25 year-old. Thanks also to the Aerie team for being rock stars [Phonetic] quarter-in quarter-out. I am confident that the changes we are making to our supply chain, logistics and operations are also setting us up to succeed well into the future. Consistent with what others have said, we saw slowdown in demand this summer. We are the number 1 brand for denim standing in the country. We remain committed to maintaining this precedent in the long run. We like the way September starting and we're very excited for the second half of the year, and we think that with the systems that we have in place, and what we have going on for us, they differentiate us from everybody else. Yeah, for sure, as I mentioned, all categories in Q2, we saw -- we saw gains in every category, in fact all categories delivering on double-digit constant growth. Please in sweat [Phonetic] especially when you look at a matching set, that's still trending for us. There is a renewed excitement around AE and I think we are at the very beginning of a great new chapter. Now, let me provide some second quarter details by brand. We think inventory is reset. Significant progress was made across both these initiatives. I'm very proud to announce a record second quarter fueled by strong customer demand for our products and brand. Year-to-date Aerie's customer file has expanded over 20%. During the second quarter, we took steps to strengthen our capital structure. And they ship their first few packages for other customers and for us, and quite honestly, we're blown away by the amount of interest we've had in this business. Maybe if you could just elaborate on some of the drivers of double-digit margins in the back half. And good news is, they're not only wearing them in, they're wearing them out now. Our leading health and safety measures remain in place across all facilities. Edited Transcript of AEO.N earnings conference call or presentation 7 At this time, I would like to turn the floor back over to Mr. Schottenstein for closing comments. I mean, thats pretty impressive. Mexico is a good example of this, where our omnichannel selling strategy is driving healthy growth and profitability in the market. Now on to our outlook. Aerie for instance has more of a northeast and eastern coast penetration. I mean, the Q2 specifically, really first half, I mean Aerie had some challenges, obviously, when we talk go back to the supply chain disruptions last fall, the air freight that we experienced mostly in Q4, that some of that carried into Q1. Weve implemented a hiring freeze and paused noncritical spending. Great. For the quarter, Aerie revenue was up 11% and American Eagle declined 8%. As mentioned earlier, we have paused all uncommitted CapEx spend for the balance of the year as we absorb and grow into our investments. We are cycling extraordinary and uneven demand patterns brought on by stimulus and COVID over the last few years, and we are navigating through a highly volatile macro environment. I can [indiscernible] the last part of that question first. Second quarter results clearly demonstrate the growth and value creation we are looking to unlock. So it completely fits with our strategy of leveraging scale and innovation to help us manage costs and improve service. We saw a plus 5% increase in 2019. This provides additional liquidity under more favorable terms. And to see the way that investors carry on I cant control that. We will focus on leveraging the agility to gain last year and the strength of our capabilities deliver to our customers and posted strong second half. And then I am confident we will get back to some level of appropriate dividend and investing back in the business first, where we see where appropriate, some level of appropriate dividend and then opportunistic share repurchase the way we have approached it, but we will definitely we have the history of returning cash to shareholders, and we will definitely get back to that once we bolster our cash position a bit here. Thanks, Jen and good morning, everyone. Okay. After submitting your information, you will receive an email. Any color there would be helpful? BofA Securities Cuts Price Target on American Eagle Outfitters to $9 From $14, Maintain.. MT. Earlier this year, we welcomed Liz Brunnemer, AE's new head of design. And we are focused fully on profit generation, cash flow generation, on the revenue, we're seeing -- we're focused on flowing through these phenomenal Aerie growth that will be a continuation, that will be baked into our targets we come back out with in January. This is a new baseline to start from. Our typical payback period on Aerie stores is less than 3 years, with returns that well exceed our cost of capital and reflect the companys highest ROI. Our jeans collections continue to deliver great results across genders. Thank you very much and best of luck for back-to-school and holiday. The campaign has already generated a ton of likes, generating close to 1 billion impressions in the first week, bringing the Aerie real movement to more people than ever before. Volatility profiles based on trailing-three-year calculations of the standard deviation of service investment returns. And we feel we're in great position, we're going to have great selection in our store, and it's going to be exciting place to shop, it's going to be a great online experience where these thing would be first introduced in the United States, why retailing on our app is being introduced right now. So, we're very optimistic and we feel in a position as far as inventory is going to be. We are hearing a lot of mixed weaves on denim right now, and maybe some disappointment in back-to-school performance. Yes. Image source: The Motley Fool. So I think we were up 17% in Q1 2019, if you normalize for that Jamaican [Phonetic] payment, if you're comparing to '19 for the second quarter, we actually up 19%. Our focus on great outfitting with updated bits and fabrics are certainly resonating. You mentioned OFFLINE, but just can you give us, elaborate little bit more about where you're seeing the growth, whether it's obviously with the core of underwear or just beyond. Jennifer Foyle -- President and Executive Creative Director of AE & Aerie. So there is variability, but we're managing through it and we feel like we're set up for a great season. Importantly, I believe these benefits are sustainable and we're going to continue to build on that over time. Aerie's operating profit rose 133% compared to second quarter 2020 and operating margin expanded to 21%. And I'll go back to unhealthy inventory levels, too many SKUs, too many choices we bought revenue. They will bring at the cost, amazing accomplishment. We are sticking with our strategy. We hit on Mexico a bit. I just saw the holiday review for some of the new shoots in American Eagle and Aerie, it's very optimistic with the dressing, what these customers want, and just moving on Aerie. We are seeing some new shifts in silhouettes and denim. Sure, Matt. Yeah, Jen, and I also -- I will also add some key data. Strong demand led to significantly higher full price sales and we strategically removed promotions. So we still have Ill call Ill just leave it at that description. Our diluted share count was $209 million and included 36 million shares of unrealized dilution associated with our convertible notes. Now, shifting to American Eagle, revenue declined 8% to last year. I'm getting the goods where the customers demand is in today's world. So again, the demand could change versus direct or in-stores and that's what we're prepared to address, as a team, where our customers that we're going to provide the product for them. Since our last update, we have expanded the scope of our expense reductions as we continue to target store and corporate compensation, professional services, travel and advertising. Good afternoon everyone. We're thrilled to see very strong customer data, especially as we head into our key back-to-school season. Good afternoon, everyone. But I'd like to start with a few highlights. I can start, Jay. I'm just curious what your thought is, because you are clearly a very powerful player in denim. Mike mentioned it, we certainly get in a great position as we move into Q4. You may proceed with your question. And one thing I'm very proud is, that we put together great thing, whether it be marketing, whether it will be our merchandise team, whether it will our designing team, the store operations and definitely our logistics team. In May, we launched our Love The Swim You're In TikTok campaign highlighting all the ways to rock your Aerie swim. Note, the second quarter reported digital revenue declined 5% as we lapped elevated sales due to a timing shift in shipments from the first quarter into the second quarter of last year. I've never seen a better assortment and certainly I haven't seen a better team executing to a strategy to that. AE is second only to Gucci with 35 million unique visitors to date and exceptional engagement metrics. Because it really sounds like you're driving this business for quality sales at higher and higher profits. We've secured our capacity. Our team has done a tremendous job. But Mike, you saw tremendous growth in margin dollars at the American Eagle side. And then when it comes to our new idea, I cant tell you, but its very exciting. Kelly, just to expand on the $600 million, totally freight-related, nothing to do with the slowdown in demand, nothing to do with anything else. Because I have been around and you going around here. But we are also incubating new brands and new businesses. As a note, our second quarter fiscal 2021 results are primarily compared to second quarter fiscal 2020 with comparisons to the second quarter of fiscal 2019 included where applicable. Great. I'm highly encouraged by our results and excited for upcoming seasons. The actions we have taken to reset this year were a significant undertaking. This spring, we have raised over $1.7 million for important causes according bring change to mind and it gets better. We have to deliveries this year versus one last year, because we knew that it was going to happen later and we wanted to delight our customers even more as we anticipate the headwinds into September. What changes are you making across the assortment at Aerie and American Eagle in the third quarter? As we make the transition into new denim silhouettes and fashion trends and bottoms, we see an opportunity to better allocate our investment. I am thankful to our teams for acting quickly and purposely. Market expansion is progressing with 16 new stores across the US and Mexico and our first store in Hong Kong. Look, I love whats happening out there right now. As far as fast fashion and competition, look, there is always competition. Turning to expenses. And look they're checking and we're going to get more aggressive there as we look ahead. And we have talked about the 100-plus Aerie and offline locations, and we continue to invest in our digital and supply chain capabilities this year with other projects. Aerie and AE are two of the biggest brands in the market and are delivering truly exceptional results. Published Sep 7, 2022 06:32AM EDT (RTTNews) - American Eagle Outfitters Inc. (AEO) will host a conference call at 4:30 PM ET on September 7, 2022, to discuss Q2 22 earnings results. Were in line, and we think were in a good place in terms of typical historical clearance levels coming into August and the sales related to those units. Okay. If you could talk about how much you expect inventory to be down at the end of the year that would be great. We're not chasing revenue targets. So, I am just wondering how often do you kind of in your research, how often do you compete against them? As we navigate through near-term macro challenges, we have not taken our eyes off the strong potential for future growth. So were very confident in being double digit in the back half, and were looking forward to 23 already benefiting from all this growth, 30% plus square footage growth from these 100 locations and focusing on at least the mid-teen operating rate, if not better, in terms of how were setting up our plans for next year. Thanks, Adrienne. So I think the team is ready to address that. At the end of the day, we have to be different than everybody else. As we make additional progress, we expect to end the third quarter with inventory up in the mid-single digits and fourth quarter ending inventory down to last year. Stock Market Sell-Off: Is American Eagle Outfitters a Buy? You can do some of your own math on just the implied revenue growth from these stores. We will continue to build out our Smoothez collection in upcoming seasons. But as we look at that, sort of the early look toward the low to mid-teen, we haven't seen those types of margins for pre-2008. And what does that do to the overall kind of pricing pressure? I'm actually ecstatic about the fact that we're driving similar to higher revenue with this income flow through that we're seeing. So we are, as much as -- we're looking at the same compared to 2019 you are. While we will take the rest of this year to strengthen our cash position, we are committed to continuing to return cash to shareholders as a fundamental principle. We expect this to improve transaction speed and minimize wait time, especially as we head into our peak fall and holiday selling seasons. I mean you have been doing this as long as I have been doing this, so. Our next question comes from the line of Matthew Boss with JPMorgan. Great, thank you so much. I couldn't be more optimistic about the potential ahead as we make our way to the next $1 billion in revenue. The operating margin of 14.1% was our highest in 13 years. I mean thats what our job is, right, to compete and to try to do it better than anyone else out there. Hey guys. It's a company that's focused on middle mile. And also introducing new concepts into the brand, not just introducing more denim, but introducing some additional fresh product add some new type of products, too, which would be very exciting. And it will be launched for spring 2023. Thank you. On that note, I'm excited to share that in the quarter, we acquired AirTerra, an innovative logistics provider. Our next question is coming from Adrienne Yih of Barclays. They didnt go bad one day. And I think we're exceeding those expectations, I think, yes, so as we talk about our targets. I actually like to take a little bit of a step back. So both first and second quarter, more than 500 basis points above 2019. So as we get into the back half now, inventory is reset. And like Jen says, we're humble. Would you consider a premium line or premium brand under the AEO Inc. ban. We ended the quarter with $98 million in cash and total liquidity of $453 million. We are probably going to look at a relatively smaller new store count for next year, just so we can focus on that, but we still believe there is runway in terms of store growth over the next 3 years. And certainly, we are humble and we certainly pay attention to the new up-and-comers, Shein being one of them. American Eagle is a dominant chain brand and the go-to destination for youth with very strong brand affinity and recognition, innovation, new products fueling new fashion trends and further global expansion are key areas of focus to drive profitable growth. The Motley Fool has a disclosure policy. Financial results exceeded our expectations. And of course, we are investing in Quiet, which is a business that not only is it providing benefits to American Eagle, but we are very excited about where thats headed and the potential in that business. So, we have Todd Snyder, which is up well over 50% this year. Returns as of 06/03/2023. Thanks, Jen and good afternoon everyone. Everybody in this Company if focused. You also alluded to some savings you anticipate in the first half of the year next year. Please disable your ad-blocker and refresh. Your next question is coming from Matthew Boss of J.P. Morgan. We protect our brands, both American Eagle I mean certainly American Eagle, is something to be proud of and Aerie, the new up and comer. Its really down to bringing summer goods into August at a historical clearance level. Every day, we have some really new exciting concepts that we are going to launch. OFFLINE is a new concept for us. We are very innovative whether we are innovative and merchandise, whether we are innovating our technology. AE too has a great strong delivery, but I think this strategy is really smart for the Aerie team in how we approached it. This concludes todays conference. We will run AirTerra independently as it supports AEO's business as well as provide services to other retailers.
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