American Eagle's two key brands are moving in different directions.
Revenue at the retailer's namesake banner fell during its fiscal first quarter, even after it ramped up its marketing campaign with actress Sydney Sweeney. Meanwhile, sales at its intimates brand Aerie spiked during the quarter.
The trends at the retailer appeared to disappoint Wall Street, as shares tumbled more than 10% in extended trading.
In the three months ended May 2, comparable sales at the American Eagle banner fell 2%, far worse than the 3.1% growth that analysts had expected, according to StreetAccount. Meanwhile, comparable sales at Aerie soared 25%, beating expectations of 19.1%.
Net revenue for the American Eagle brand dropped 2% to $678.4 million, while Aerie revenue jumped about 34% to $480.83 million.
Combined, the business saw comparable sales grow 8%, short of expectations of 8.6%, according to StreetAccount.
"While results at American Eagle were mixed, our teams are moving decisively to reignite the women's business and strengthen product execution and brand positioning," CEO Jay Schottenstein said in a news release
"Looking ahead, our priorities are clear. Despite continued consumer and macroeconomic uncertainty, we remain confident in our ability to navigate near-term headwinds," he added." We are focused on operational excellence and disciplined execution to drive long-term value for AEO and our shareholders."
During the quarter, American Eagle reignited its campaign with the "Euphoria" star Sweeney ahead of the summer shopping season, but took a tamer approach than the controversial campaign it launched last year under the slogan: "Sydney Sweeney has great jeans." This time around, instead of cleavage and double entendres, Sweeney was all smiles in a modest, casual look on the beach.
Though the two campaigns were different, the effect has been the same – neither led to a major increase in sales at American Eagle's namesake banner.
Here's how the apparel company performed during the fiscal first quarter compared with what Wall Street was anticipating, based on a survey of analysts by LSEG:
During the quarter, American Eagle posted net income of $23.53 million, or 14 cents per share, compared with a loss of $64.90 million, or 36 cents per share, a year earlier.
Sales rose to $1.20 billion, up 10% from $1.09 billion a year earlier.
American Eagle reiterated full-year guidance and issued an outlook for the current quarter. For the year, the company expects mid-single digit percentage comparable sales growth and an increase in gross margin.
In the second quarter, the retailer is expecting comparable sales to rise by a mid-to-high single digit percentage, compared to estimates of 6.5% growth, according to StreetAccount. It's expecting its gross margin to be down compared to the prior year during the period.
