Roller Compacted, Non Steel Ring Underwear Leader Aerie Continues To Double Digit Rise

The American Eagle Outfitters Inc. (NYSE:AEO) brand of the US youth apparel retailer has declined again, leading to the two quarter sales data and the current three quarter performance outlook all worse than market expectations.

American Eagle Outfitters Inc. (NYSE:AEO) suffered a sharp setback of 16% to 13.66 dollars on Wednesday, a two-year low.

In the two quarter of August 3rd, the sales of American Eagle Outfitters Inc. increased by 2% year-on-year, less than 3% of FactSet's overall forecast, and also significantly slower than the 6% in the first quarter, mainly because of the 16% strong growth of underwear brand Aerie, which could hardly offset 1% decline in American Eagle.

Jay Chottenstein, the group's chief executive, said that he was disappointed at what he had expected. He pointed out at the analyst conference call that the May explanation for the low temperatures weakened the demand for new summer products and that the return to school season started late this year.

He also stressed that the American Eagle brand cowboy series maintained double-digit growth in the two quarter, both men and women's wear. In the past six consecutive years, each quarter was breaking the record. Moreover, the overall positive momentum in the three quarter has been satisfactory. "I am optimistic about the outlook for the second half of the year," Jay Chottenstein told analysts.

Neil Saunders, general manager of GlobalData Retail, a consultancy, believes that "there is no denying that the basic performance of AEO has declined." In fact, the group's main competitors are no exception. The brand names of Abercrombie & Fitch Co. (NYSE:ANF) and Hollister did not achieve the same store sales growth in the last two quarters. Urban Outfitters Inc. (NASDAQ:URBN) two brands Anthropologie and Urban Urban also fell by 3% and 5% respectively.

Underwear business continues to take off at the expense of competitors. Aeire's same store sales increased by 27% over the same period last year, gaining double-digit growth for 19 consecutive quarters, while the girl's underwear brand PINK, which belongs to L Brands Inc. (NYSE:LB)'s Victoria 's Secret Vitoria, PINK fell in the same quarter during the two quarter. The group management finally made a statement last month to reshape the largest underwear brand in the United States from marketing promotion.

American Eagle Outfitters Inc. earned a total of US $1 billion 40 million 900 thousand in the two quarter, slightly better than the market expectations of US $1 billion 10 million, up 7.9% over the same period last year. Net profit increased by 7.7% to 64 million 980 thousand US dollars per year, EPS increased from 0.34 US dollars in the same period last year to US $0.38, adjusted EPS to US $0.39, which is 22% higher than FactSet's consolidated forecast 0.32 US dollars.

American Eagle Outfitters Inc. predicts that the overall sales of the same store will grow to a low median figure in the three quarter. The adjusted EPS will be in the 0.47-0.49 dollar range, and the comprehensive expectations of FactSet for these two indicators are 3.8% and 0.52 US dollars respectively.

The chief financial officer, Robert Madore, revealed that at present, China claims about 30% products for the group. He pointed out that since the tariff problem emerges, the purchasing team has negotiated with Chinese production partners and transferred some capacity and more than 2/3 tariffs, and the proportion of China's capacity in the next 12-18 months can be reduced to 20%. He stressed that tariffs will affect "controllable" in the next two years.

American Eagle Outfitters Inc. has announced that it will follow the steps of Abercrombie & Fitch Co. and start selling products containing CBD (hemp two phenol) before the holiday season to cater for the rapidly expanding consumer demand of the core young customers. The two groups will have 500 and 160 stores on the shelves CBD beauty care brand Seventh Growth products.

Jay Schottenstein briefly mentioned in the conference call that the group would enter the beauty market, but did not explicitly use the above cooperation to establish its own brand.

Although the beauty industry in the United States has achieved 7% growth in 2018, color cosmetics sales are generally weak, and both mature brands and start-ups are facing weaker demand. Beauty retailer Ulta Beauty Inc. (NASDAQ:ULTA) issued a quarterly report last week, warning the US makeup market to enter the downlink cycle. The latest round of product innovation did not effectively stimulate consumption.

American Eagle Outfitters Inc. (NYSE:AEO) closed $14.38 on Wednesday, down 11.6% from a day ago, expanding its 2019 decline to 25.6% so far. In the two quarter, the group returned $83 million through dividends and repurchase shares, and had more than $300 million in cash at the end of the quarter.