Shares of American Eagle Outfitters (NYSE: AEO) slipped nearly 8% on Wednesday, after the retailer forecast third-quarter profit below expectations, partly due to lower-than-expected sales for its Aerie line of lingerie.
Same-store sales at Aerie rose 27% in the second quarter. Analysts had expected the brand’s appeal among younger women to drive an average of a 30% increase in sales. The collapse in sales for Victoria Secret’s (NYSE: LB) Pink over the last three months had led analysts to raise their same-sales forecast by an average of 3% since the start of August.
American Eagle has been expanding the Aerie business as the brand surges in popularity, given its wide collection of bras, bralettes and lingerie for women of all body types. The Company raised wages in the second quarter and said it would continue to train and incentivize staff as it looks to open 50 to 80 Aerie stores next year.
“Our core products of jeans and bras within Aerie really require an enhanced selling effort and we actually think it’s a competitive differentiator for us,” Chief Financial Officer Robert Madore said on a conference call with analysts.
The additional investment in Aerie is likely to impact the company’s third-quarter earnings, which is expected to be between 45 cents and 47 cents per share. This came in below analysts’ expectation of 49 cents per share. However, the Company’s comparable sales beat estimates in the second quarter, thanks to a strong 7% rise in sales by its flagship American Eagle apparel line in the back-to-school season.
Net income nearly tripled to USD 60.3 Million, or 34 cents per share and net revenue rose more than 14% to USD 964.9 Million in the quarter ended Aug. 4th. Both profit and revenue beat Wall Street estimates.