American Eagle Outfitters Inc.’s Aerie line continues to carry the company, with the intimates brand posting a sharp climb in revenue, even as the namesake American Eagle line took a page from rival retailers and posted tumbling sales in the summer quarter.

Aerie’s revenue in the period ended Aug. 1 climbed 32 per cent, while American Eagle brand revenue slipped 26 per cent, accelerating a divergence already apparent last year. Overall, the parent company reported net revenue for the second quarter that beat the average analyst estimate.

Key Insights

The results underscore the ways retailers are turning to their strongest business lines as the coronavirus pandemic upends the industry. Demand for loungewear has been a bright spot in an otherwise challenging period for apparel sales.

The stark divide between the two brands has had some investors in the past consider if a spin off of the high-performing Aerie line would be beneficial. The split was especially pronounced on the digital front, where Aerie grew 113 per cent and AE rose just 21 per cent during a quarter when many more Americans were shopping from their couches.

American Eagle said on a conference call that “uncertainty and delayed starts to back to school” have hurt sales during the period. The retailer is trying to extend its back-to-school sales out later in the year, while simultaneously pulling some holiday sales earlier.

Chief Executive Officer Jay Schottenstein said the retailer improved its business from the first quarter. Aerie largely helped that process and Schottenstein called its performance “simply outstanding.”

Jennifer Foyle, who led the fast-growing Aerie line, was promoted to American Eagle’s chief creative officer, the company said in a separate statement. She will continue to oversee Aerie and also merchandising, design and marketing for the company’s namesake brand.

Market Reaction

The shares climbed as much as 4.3 per cent to US$13.77 in New York. American Eagle fell 10 per cent this year through Tuesday.