American Eagle Outfitters, Inc. (NYSE:AEO) Q3 2019 Earnings Conference Call - Final Transcript

Dec 11, 2019 • 09:00 am ET


American Eagle Outfitters, Inc. (NYSE:AEO) Q3 2019 Earnings Conference Call - Final Transcript


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Greetings and welcome to the American Eagle Outfitters Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ms. Judy Meehan. Thank you. You may begin.

Judy Meehan

Good morning, everyone. Joining me today for our prepared remarks are Jay Schottenstein, Chief Executive Officer; Chad Kessler, AE Global Brand President; Jen Foyle, Aerie Global Brand President; and Bob Madore, Chief Financial Officer.

Before we begin today's call, I need to remind you that we will make certain forward-looking statements. These statements are based upon information that represents the Company's current expectations or beliefs. The results actually realized may differ materially based on risk factors included in our SEC filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of our new information, future events or otherwise, except as required by law.

And now I'd like to turn the call over to Jay.

Jay L. Schottenstein

Thanks, Judy. And good morning everyone. In the third quarter we delivered strong comparable sales growth and record revenue. In the challenging environment, promotional activity increased relative to our expectation. Yet we achieve EPS that was in line with our guidance. Importantly, we continue to deliver on our strategic pillars with our core AE jeans and Aerie businesses demonstrating strong performance. On a consolidated basis this was our 19th consecutive quarter of positive comps, with growth in both brands. We also saw a comp increase in stores and continued double-digit increases online.

Aerie demonstrated our management momentum with growth in the quarter, accelerating our growth year-over-year and two-year stack basis. This marked the 28th consecutive quarter of double-digit sales growth. New customers embracing the brand and expanded apparel offerings have been very well received. Aerie remains one of the fastest growing brands and retail today, with profitability that continues to improve. We are just getting started and are very excited about the significant opportunity ahead.

For the American Eagle brand, the back-to-school season was successful, with strong demand and seasonal apparel. Third quarter sales process was led by our focus on jeans, which had delivered 25 consecutive quarters of record sales. We are pleased with our investments in new denim fits and starts [Phonetic]. However, after back-to-school, we experienced softer demand in certain apparel categories, primarily in men's and women's tops, which led to higher markdowns.

Some of these pressures have continued into fourth quarter. The team is working harder, to strengthen the areas of underperformance and I'm confident we will be back on track in short order. We have an incredibly strong organization, highly relevant brands and a leading omnichannel platform. We remain laser focused on our long-term strategic pillars to profitability grow across brands and channels. Improved inventory efficiency, delivery, returns to shareholders.

And now I'll turn the call to Chad to give further color on AE results.

Chad Kessler

Thanks, Jay, and good morning everyone. In the third quarter, we have record sales fueled