US teenagers are favouring American Eagle over Abercrombie & Fitch according to the two fashion retailers’ recent trading updates.
American Eagle’s operating income for the fourth quarter ending January 31 was up 31% to $112m (£74m), and over the year increased 11% to $207m (£137m). Total net revenue increased 3% to $1.1bn (£728m) in the quarter, and comparable store sales were flat.
American Eagle’s robust fourth-quarter performance contrasts with that of Abercrombie & Fitch, which reported a 14% fall in sales to $1.12bn (£741m) in the fourth quarter, and a 10% slump in comparable store sales.
Abercrombie & Fitch’s adjusted non-GAAP income was down from $104m (£69m) to $81m (£54m) in the quarter and the retailer is exiting Australia after only two years as it struggles to captivate fickle teens across the world.
Planet retail US analyst Kelly Tackett said American Eagle’s lower price point makes the brand much more accessible for teen audiences.
She added Abercrombie & Fitch has an entrenched brand image that no longer resonates with teens.
“Logos are definitely out, and there’s a quest for individuality and authenticity which is not a strong suit for Abercrombie,” she said. The retailer is in fact planning to phase out its logo-branded clothing as well as invest heavily in ecommerce over the next year.
American Eagle said margin improvement was driven by reduced markdowns. The retailer, which launched in the UK last year, said capital expenditure at $245m (£162m) was higher than expected due to investments in omnichannel, retail fulfilment and IT costs.
American Eagle expects capital expenditures to be around $150m (£99m) in 2015. This includes the chain-wide roll-out of a point of sale system, supporting technologies and the completion of its new fulfilment centre, as well as store investments.
American Eagle operates 1,000 stores in 80 countries.
Abercrombie & Fitch has 969 stores worldwide after closing 39 and opening eight in the quarter.