American Eagle (NYSE:AEO) missed Wall Street’s sales targets for a second quarter in a row on Thursday, but profits grew by nearly 60% thanks in part to lower product costs.
Earnings per share at the clothing retailer totaled 39 cents vs. 38 cents expected, on revenue of $1.29 billion vs. $1.31 billion expected
The company’s reported net income for the three-month period that ended Aug. 3 was $77.3 million, or 39 cents per share, compared with $48.6 million, or 25 cents per share, a year earlier.
Sales rose to $1.29 billion, up about 8% from $1.2 billion a year earlier. That sales gain would have been slimmer had it not been for a calendar shift, which positively impacted second-quarter sales by $55 million.
During the quarter, American Eagle’s intimates line Aerie saw revenue grow 9% while its namesake brand grew by 8%.
American Eagle’s gross margin came in at 38.6% — 0.9 percentage points higher than the prior year and in line with what analysts had expected. The gross margin expansion was led by “favorable product costs,” indicating American Eagle spent less to make its assortment during the quarter. It’s unclear if it lowered prices as a result.
The longtime mall brand issued a better-than-expected outlook for the current quarter but its forecast was lower than anticipated for the full year, indicating the company is still bracing for a turbulent second half.
AEO shares began Thursday down $1.60, or 7.4%, to $20.10.
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