Strong Aerie sales drive American Eagle results

(Reuters) - American Eagle Outfitters Inc AEO.N reported a surprise rise in comparable sales and posted better-than-expected results in a glum retail environment, helped by strong demand for its jeans and Aerie line of lingerie.

FILE PHOTO - Jeans are seen for sale in an American Eagle Outfitters retail store in Manhattan, New York, U.S., May 13, 2016. REUTERS/Mike Segar/File Photo

Shares of the teen apparel maker, which forecast third-quarter comparable sales to be flat to up low single digits, rose as much as 13.3 percent to $12.70 on Wednesday.

Traditional apparel retailers, including American Eagle, have been struggling as consumers favor fast fashion and online retailers amid a battered retail sector seeing a spate of bankruptcies such as Aeropostale Inc and Wet Seal.

However, a bright spot for American Eagle has been its Aerie brand of lingerie, which was early to cash in on the popularity of bralettes - bras without padding and underwires, and has been a hit with millennials.

The lingerie brand contributed 11 percent to American Eagle’s revenue for the year ended Jan. 28, 2017.

Aerie has been taking market share from rivals such as Pink, a unit of L Brands Inc LB.N. Jefferies analysts expect Pink sales to decline within a few quarters.

American Eagle also said it benefited from strong demand for its jeans, bottoms and women’s apparel in the quarter.

“We are particularly encouraged by the progress made in categories like jeans where more emphasis on features like style and fit have helped to boost sales...early data suggest that American Eagle did well in denim over the key back-to-school period,” Anthony Riva, an analyst at GlobalData Retail said.

The company, last month, also unveiled its new campaign to market its jeans ahead of the back-to-school season and cash in on the stretch and distressed jeans trend.

Comparable sales of the Aerie brand jumped 26 percent in the second quarter ended July 29, handily beating the 16.4 percent rise, according to analysts polled by Consensus Metrix.

The company’s comparable sales rose 2 percent in the quarter, beating analysts’ average estimate of a dip of 0.4 percent, according to research firm Consensus Metrix.

Excluding certain items, American Eagle earned 19 cents per share, while net revenue rose 2.7 percent to $844.6 million.

Analysts on average had expected earnings of 16 cents per share and revenue of $824 million, according to Thomson Reuters I/B/E/S.

Reporting by Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta