Aerie brand’s revenue of $322 million rose 8 per cent reflecting a 27 per cent 3-year revenue CAGR, while American Eagle revenue of $686 million declined 6 per cent versus first quarter 2021 reflecting a -2 per cent 3-year revenue CAGR, the company said in a media release.

American Eagle Outfitters’ consolidated store revenue increased 2 per cent, while total digital revenue declined 6 per cent. Compared to pre-pandemic first quarter 2019, store revenue increased 1 per cent and digital revenue increased 48 per cent.

Its gross profit of $388 million declined 11 per cent from $436 million in the first quarter of 2021 and reflected a gross margin rate of 36.8 per cent compared to 42.2 per cent last year. Higher freight costs impacted the gross margin by approximately 340 basis points and its supply chain business had a 120-basis point impact as it integrates and ramps up the platform.

The selling, general and administrative expense of $299 million increased 13 per cent. Its operating income of $42 million included $35 million from higher freight costs and a $12 million loss from the supply chain acquisitions and compared to operating income of $133 million in the first quarter of 2021.

“The first quarter proved challenging, with demand well below our expectations, pressuring operating profit. Comparisons from an extraordinary spring last year driven by stimulus payments and pent-up customer demand, were compounded by rising inflation, higher gas prices and a stronger than anticipated pivot to other discretionary categories. In hindsight, our plans entering the year were too optimistic. We are taking swift measures to adjust our inventory and expense base with a firm goal of entering the second half better aligned with demand trends,” commented Jay Schottenstein, AEO’s executive chairman of the board and chief executive officer.

For the second quarter, management expects top-line growth to trend similarly to the first quarter with a gross margin rate of approximately 33 per cent. This reflects higher markdowns to clear through spring inventory, higher freight costs and the impact of the supply chain acquisitions.

Incorporating shifts in the macro environment, the company is lowering its outlook for the year. Management expects operating profit to be above $314 million achieved in Fiscal 2019, with total revenue up in the low single digits compared to Fiscal 2021. The company expects to enter the second half better aligned with demand, with a more balanced inventory position and leaner expense base, driving improved margins and profitability relative to the first half.

Fibre2Fashion News Desk (KD)