Dozens of American Eagle stores are slated for closure in 2020 — and hundreds more could shut down for good in the next few years.
During the company’s second-quarter earnings call on Wednesday, EVP and CFO Mike Mathias shared that around 40 to 50 locations are expected to permanently shutter in the coming months. The chain explained that the units on the chopping block were chosen based on the length of their leases, proximity to other outposts, the “profile” of the malls they inhabit and customer engagement levels.
“We are actively evaluating our fleet and plan to increase closures over the next several years and reduce the fixed costs associated with our stores,” he said. “While our fleet remains important for distribution and customer engagement, the recent success we have had acquiring customers through our digital channel and fueling our online growth, gives us additional confidence in our plan to reduce our footprint.”
Mathias added, “We are very confident in our ability to transfer customers and sales from these locations.”
The retailer also shared that it would identify additional stores to shut down based on its learnings from the 2020 closures amid the coronavirus pandemic. Nearly 250 of its leases are expiring this year — and another 250 next year — with an average lease term of under 3.5 years.
“Our flexible lease portfolio will allow us to quickly exit locations that no longer make sense,” Mathias said.
According to American Eagle, the move was partly driven by digital demand, which rose 48% in the three months ended Aug. 1. Revenues at the company dropped 15% to $884 million as the COVID-19 health crisis forced the closures of its stores across the country for weeks. While sales at Aerie improved 32%, those at American Eagle declined 26%. It also reported an adjusted loss of $0.03 per share in the quarter. (Analysts had forecasted EPS of 29 cents and revenues $1.02 billion.)
“Throughout this event, we operated with strong disciplines, reduced expenses, cut inventories and carefully managed liquidity,” chairman and CEO Jay Schottenstein said yesterday. “We controlled what we could and generated positive free cash flow, strengthening our balance sheet. Inventories are in good shape, and I believe we are very well-positioned for the second half of the year. We will remain focused on managing through the near term and preparing for a new future as we accelerate strategies to transform our business and emerge with strength.”