American Eagle Outfitters AEO shares plunge after earnings report

Shares of American Eagle Outfitters fell in after-hours trading on Wednesday as the company lowered its outlook for the full year.

The company cut its guidance, although it matched Wall Street’s quarterly profit expectations and beat revenue expectations.

The mall retailer said it now expects operating profit to be between $250 million and $270 million, below the $270 million to $310 million range it had forecast in March. He said he expects full-year revenue to be flat or down in the single digits, lagging the single-digit rise he previously forecast.

Sales trends slowed as the company entered the second quarter, a trend the retailer factored into its forecast. On an earnings call, Jen Foyle, the company’s executive creative director, said she hopes shoppers will buy more seasonal merchandise as Memorial Day rolls around and the summer weather sets in.

Shares fell about 14% following the company’s earnings report after the market close.

Here’s how the company fared for the three-month period ending April 29 compared to what Wall Street expected, based on a Refinitiv analyst survey:

• Earnings per share: 17 cents adjusted vs. 17 cents expected
• Revenue: $1.08 billion vs $1.07 billion expected

American Eagle, which includes its eponymous brand and the Aerie brand, was a significant departure from its competitor, Abercrombie & Fitch. Earlier Wednesday, shares of Abercrombie soared as it posted a surprise profit and boosted its outlook, dragging American Eagle stock with it.

American Eagle lost those earlier gains as it released its own quarterly results after the bell, including lower earnings. Net income fell about 42% to $18.45 million, or 9 cents per share, from $31.74 million, or 16 cents per share, a year ago.

Total net revenue increased about 2% to $1.08 billion from $1.06 billion a year ago. Store sales increased by 5%. Digital revenue fell 4%.

Its brands have had mixed results. Aerie’s comparable sales increased 2%, but American Eagle’s eponymous brand comparable sales were down 2% from the same period a year earlier.

American Eagle has made progress with inventory levels. Many retailers, including Target, Kohls and others, got stuck with too much merchandise after shipments got stuck in the supply chain and consumer preferences drifted away from popular categories during the Covid-19 pandemic.

Inventories fell 8% to $625 million at the end of the quarter compared to the same period last year.

In a press release, CEO Jay Schottenstein said the company wants to rebuild operating margins and seek profitable growth. He said he was focused on “inventory discipline, cost savings and efficiency across the business,” especially in a tougher economic environment.