American Eagle Outfitters reported flat revenue for the second quarter ended July 29 but remains optimistic about its full-year performance driven by strengthened demand.

Total net revenue grew only 0.2 per cent to $1.2 billion, with store revenue up 4 per cent and digital revenue down 7 per cent.

American Eagle brand sales slipped 1 per cent to $767 million while the Aerie brand’s sales rose 2 per cent to $380 million.

Gross profit reached $453 million, up 22 per cent compared to the second quarter of 2022, reflecting a gross margin rate of 37.7 per cent compared to last year’s 30.9 per cent. 

Neil Saunders, MD of GlobalData, said the company is “back into lackluster territory” as the weak numbers come off the back of a poor performance in the prior year. 

The American Eagle brand is a chronic underperformer as the sales decline comes on top of an 8 per cent fall last year and a 9.3 decrease on a two-year basis, Saunders explained.

Aerie’s modest growth follows a very long run of growth, but the downtick in performance is concerning, he said, attributing the softer numbers to a more constrained consumer and a slightly more modest pace of store expansion.

“We believe Aerie can get back on track and will likely see an uptick in performance around the holidays. However, unless the assortment is improved, American Eagle will likely languish in slow growth territory for somewhat longer,” Saunders concluded.

Jay Schottenstein, executive chairman and CEO at American Eagle Outfitters, said the second-quarter revenue and operating profit exceeded expectations thanks to stronger demand in June and July.

“It’s encouraging to see positive momentum continue into the third quarter, across brands and channels.”

For the full year, the company expects revenue to be up low single digits to last year, compared to prior guidance for revenue in the range of flat to down low single digits.