Aerie soars in back-to-school sales, while American Eagle works to ‘balance’ denim

On an earnings call on Wednesday, AEO Inc. CEO Jay Schottenstein said that the second quarter “represented another important step forward for AEO.” “We built on the strength of our portfolio, making progress at American Eagle, while Aerie continued to deliver outstanding performance,” he continued. With American Eagle, he said, “We are moving in the right direction, yet there remains work to do.”

The results also come at a competitive time for the denim category, which saw brands such as Pacsun, Hollister and American Eagle launch back-to-school campaigns earlier than usual. On an earnings call, Jennifer Foyle, Aerie and American Eagle’s president, said that American Eagle was seeing “sequential improvement in denim” but also “needed to pivot.”

For the back-to-school season, for instance, that meant having more low-rise styles. “[We are] really excited about how we repositioned denim,” Foley said. “What we are needing to work through right now is just some of the older fits and really just rebalancing our inventory.” She added that bottoms, including pants and cargos, performed “exceptionally well.” “But there’s still some balance to do in denim,” Foyle explained.

By comparison, one of Aerie’s biggest strengths this past quarter was growth across categories. Foyle said that Aerie saw “consistent demand” in tees, tanks, fleece and bottoms. “Mix and match, summer brights, stripes and a little leopard all worked,” she said. Sports bras and intimates also remained strong, especially for Aerie’s private activewear brand, Offline. “I love seeing this breadth because it tells us the customer is responding to the complete lifestyle offering, not just one category or one trend,” Foyle said.

This isn’t the first time that Aerie has soared, while American Eagle has slid. In May, AEO Inc. reported record first-quarter revenue for Aerie, with comps up 25%. However, results from the staple American Eagle brand were “mixed,” with comp sales decreasing 2%, Schottenstein said at the time. The brand was dealing with challenges in its women’s business, particularly when it came to bottoms and denim, noted Telsey Advisory Group.

One bright spot, for American Eagle, however, has been men’s. In the second quarter, American Eagle celebrated its fourth consecutive quarter of growth in men’s, including tops and bottoms. “This demonstrates that our focus and strategy to restore top-line growth in the AE men’s business is paying off,” Foyle said on Wednesday’s call.

Back in the spring, AEO Inc. was optimistic that its two major properties would get a boost from back-to-school efforts. American Eagle launched its back-to-school campaign on July 22 — a 10-week effort combining mall events, campus partnerships and talent deals. American Eagle tapped actress Sydney Sweeney, country singer Ella Langley and footballer Lamine Yamal for marketing materials and worked with five sorority chapters on “RushTok” content.

Meanwhile, Aerie worked with young creators on content while rolling out leggings, matching sets and sports bras. In April, it debuted an influencer program called “Aerie Realmakers” that had one key stipulation: no AI use. Across the quarter, Aerie nearly doubled the size of its ambassador program, executives announced on Wednesday.

Going forward, AEO Inc. expects comparable sales growth in the mid-to-high digits for the third quarter, with Aerie and Offline continuing in the high-teens-to-20% range, said Mike Mathias, the former CFO of AEO Inc. and now a strategic adviser. American Eagle, by comparison, will be relatively flat. “Gross margin is expected to be similar to last year, with full-year gross margin up year over year,” Mathias continued.