Cutoff shorts summer... follows bralette spring. Mall icon American Eagle reported all-time high second-quarter sales yesterday. But sales still missed expectations, and the stock dropped 10% (womp). Mid-pandemic, AE's core brand sales fell while its loungewear sub-brand Aerie thrived. Aerie sells comfy basics, from hoodies to flared leggings — and makes up more than a fourth of AE's total sales. Pandemic-friendly Aerie is still #thriving, but AE's jeans and blouses bounced back last quarter, and are growing faster.
Not a horror movie... Last quarter, AE did a stellar job avoiding "The Discount Spiral of Death" by reducing discounts and avoiding overstock. That lack of 70% off tags led to a $121M profit, up from a $14M loss last year. AE also optimized costs by closing 18 core brand stores last quarter — but it opened 23 new Aerie stores.
Sub-brands are the new front-brands... Despite AE's rebound, Aerie was the earnings star. It's a theme: sub-brands have been driving big growth for their parents. Urban Outfitters' sales more than 3X'd last quarter, thanks to a major boost from its Free People activewear sub-brand, “Movement.” Hollister and lingerie brand Gilly Hicks now make up more than half of Abercrombie's total sales. And Old Navy makes up more than half of Gap's sales.