American Eagle Outfitters, Inc. (NYSE:AEO) Q3 2022 Earnings Call Transcript

Michael Rempell: Yes. And Jay, just for Aerie, building on what Jen was saying, I just want to make sure it’s totally clear that — we’ve opened a ton of new stores in the last year or so. I think Mike said in his prepared remarks. That — all of those openings were a headwind for comp over the early part of this year and even through third quarter. Starting in the fourth quarter, that becomes a tailwind. So, as these stores anniversary themselves, they become more mature, those stores should provide — actually those new stores, if history repeats itself, and we believe it will, based on what we’re seeing. Those new stores should provide a multiyear comp tailwind for Aerie, starting in the fourth quarter. And as it relates to Quiet, yes, we continue to be really excited about Quiet.

Its third-party customer revenue is planned to be up significantly. I think it’s up in the neighborhood of 60%, 70%, 80% this year. And when you look at our results, if you look at the American Eagle results, for the quarter, we had a lower cost per order, okay, and fewer split shipments in our results. Again, those results in retail, I think, are incredibly unusual. They might be unprecedented. And as we’re talking to other brands, other retailers, other people in the industry, everyone wants this kind of benefit in their business. We’ve proven the business case for it. And the pipeline for new customers for Quiet is extremely healthy. So, we’ll have more new customers that we’ll talk about at the end of the fourth quarter. But again, it’s a business that’s delivering results for American Eagle and providing very unique benefits in the industry that we’re confident that other brands and retailers are going to want to take advantage of.

Operator: Our next question is from Paul Lejuez with Citi.

Paul Lejuez: Just want to follow up on the response to the last question about Aerie being a drag, all those openings being a drag through the first three quarters of this year. I guess, curious what the plan is in terms of openings for next year and if you would expect a similar drag from a new class of openings. Also, would love to hear if you can give any detail about standalone performance of Aerie versus the side by sides. And then I think you mentioned product costs were going to be a tailwind. Curious how that looks first half, first — second half of ’23.

Mike Mathias: Thanks, Paul. I’ll start and Michael can maybe add on to your — or answer your product cost question. But for the Aerie stores, Michael just said a few things, let me add on to what we said about prepared — in my prepared remarks. We have 85 stores over the last year. But if you actually look back across all of ’21 and all of ’22, it’ll be over 130 stores. So, as we’ve talked about for quite some time, our digital halo effect and what happens within the brand as we invest that aggressively, you typically see a digital impact with all that new store growth and in cases where we’re adding stores to existing markets, you see an impact to the stores that were already there. So over a 6- to 12-month period, then we see a bit of a comp — a negative comp impact sometimes in markets.