Youth Apparel AE Grew By 4% In The First Quarter, But Chinese Business Is Still Bad.

Thanks to the return of jeans to the fashion map, the US youth apparel retailer American Eagle Outfitters Inc. (NYSE:AEO) has achieved super expected growth in the first quarter, stimulating the stock price surged 7.5% to 19.9 dollars at the early stage of Wednesday, the largest increase in more than five months.

As of the first quarter of May 4th, American Eagle Outfitters Inc. achieved a comparable sales growth of 6%, almost two times the market expected 3.1%.

Among them, American Eagle (hereinafter referred to as "AE") has achieved median growth in six consecutive quarters, and the growth rate was 4% in the first quarter.

AE brand President Chad Kessler pointed out at the analysts' conference call that the strong momentum of the brand is reflected in the continuous growth of conversion rate, paction volume, physical passenger flow and online business. Moreover, as the "first ladies' jeans brand in the United States", AE has broken its record for 23 consecutive quarters, and its revenue exceeded 1 billion US dollars last year. It shows that they have successfully broken the dominance of leisure sports style to the American lower garment market by using elastic technology fabrics and holes and fashion elements.

At the same time, the brand has expanded its profile and size supply to expand its audience among the 15-25 year old core customers. It has also actively contributed to the sustainable production and clothing recycling program, helping to enhance the brand image in young people with increasing awareness of environmental protection.

In addition, analysts believe that AE brand jeans are reasonably priced and well matched, and have developed a loyal customer.

The double-digit growth of comparable sales for girls lingerie and swimsuit brand Aerie continued to eighteenth quarters, but the growth rate of 14% was much lower than that of 23% in the fourth quarter and 38% in the same period last year. It was also the first time it fell 20% in the 2016 quarter of the fiscal year.

Brand President JenniferFoyle emphasized that passenger flow and conversion rate were still positive, and customer retention rate increased by 8%.

She told analysts that brand building is still the top priority.

In recent years, the explosive growth of Aerie is entirely dependent on the new brand line. The model has become the body, size, background, race, grass roots, vegetarian and outstanding women in all walks of life, thus manifests the brand's diversification pursuit. Whether the entity store or social media is playing the label of "REAL (real)", it has successfully narrowed the distance from the target consumers. Now the brand has established not only the "AerieREAL" community, but also the "AerieREALLife" content exchange platform in the past spring.

This fiscal year American Eagle Outfitters Inc. continues to focus on expanding Aerie, and plans to open 60-75 new Aerie stores throughout the year, with a medium-term target of $1 billion a year.

Of the 1061 stores in the group in May 4th, 936 belong to the AE brand, Aerie has 119 independent stores, and the other 151 are located in the AE brand store.

In the first quarter, the total income of the group was 886 million 300 thousand US dollars, which was better than the market expectation of US $855 million 600 thousand, up 7.7% from 823 million US dollars in the same period last year.

The net profit increased by 2.1% to 40 million 750 thousand US dollars per annualized year. The EPS of 0.23 US dollars increased by only 0.01 US dollars over the same period last year.

The adjusted EPS is US $0.24 and the market is expected to be US $0.21.

Last week, the apparel retailers who released their performance last week showed a different picture.

From American Eagle Outfitters Inc.'s main rival Abercrombie& Fitch Co. (NYSE:ANF), to multi brand giant Gap Inc. (NYSE:GPS) cover Pu Group, to women's clothing retailer Gap (H), and then to high-end down garment brand, "Guohu (Canada)", Canada goose, slowdown is the main theme of these retailers at this stage, weather, passenger flow, promotion and products are easy to become an excuse for dragging down performance.

Retail Metrics data show that in the first quarter of fiscal year 2019, the profits of US apparel retailers fell by 24% compared to the same period last year, not only ending the continuous growth since the three quarter of fiscal 2017, but also the highest decline since the great recession in 2008.

Ken Perkins, founder of Retail Metrics, points out that those who are suffering from weak passenger traffic are all retailers who focus on shopping centers.

American EagleOutfitters Inc. is a rare exception. Chief financial officer Robert Madore in March's conference call pointed out that the plan to close 230 stores in the next two years is a huge opportunity for them. The secret of Victoria, s Secret Vitoria, which is often compared with Aerie, will also end 50 stores this year.

The gross profit margin of American Eagle Outfitters Inc. dropped 30 basis points to 36.7% in the first quarter, and the decrease in rent and product cost was offset by the increase in promotional discounts and the increase in distribution expenses.

The operating profit margin also dropped by 80 basis points to 5.4%, mainly because the strategic investment of reconstituted stores increased, and the expenditure on advertising and professional services also increased.

Management at the conference call also warned the Trump administration that China's tariff threat would also threaten its financial performance for the group's important procurement market. Last week, the new deal that imposed a 5% tariff on all imported products in Mexico would not have an impact on the group.

As for the progress of China's business restructuring, Robert Madore revealed today that the remaining four stores had been shut down before the end of the first quarter. Currently, the group is looking for new franchises, franchise partners or joint venture partners.

He also stressed that China and Asian markets still symbolize significant development opportunities for AmericanEagle Outfitters Inc., which is "highly prioritized" in group strategy.

American Eagle Outfitters Inc. (NYSE:AEO) fell flat on Wednesday, closing at $18.54 a day, narrowing to 0.1%.

Since 2019, the stock has recorded a 4.1% decline. Although it lost 12.7% of the S & P 500 index, it lost 18.2% Abercrombie& Fitch Co. (NYSE:ANF) and 28.5% Urban Outfitters Inc. (NASDAQ:URBN).