American Eagle Stock Drops in Choppy Retail Landscape

American Eagle Outfitters Inc. nudged past first-quarter profit estimates, but signaled some top-line sluggishness for the second quarter, spooking Wall Street investors.

Shares of the retailer fell 16.2 percent to $10.12 in after-hours trading on Wednesday after the company said second-quarter revenues would slow to a low-single digital decline with operating income of $25 million to $35 million.

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Jay Schottenstein, executive chairman and chief executive officer, told analysts on a conference call that the company planned “consciously” for the year, “balancing continued optimism for our brands with the flexibility to navigate uncertainty in the macro environment.”

Now it seems AEO is having to use some of that flexibility as the retail environment has proven to weaken over the last couple weeks.

Before that, the first quarter came in about as projected, with sales growth and a hit from restructuring its Quiet Platforms logistics business.

First-quarter net income fell to 42 percent to $18.5 million from $31.7 million. But adjusted earnings per share of 17 cents came in 1 cent ahead of the 16 cents projected by analysts, according to FactSet. Excluding $21 million in charges tied to the Quiet changes, AEO saw adjusted operating income of $44 million.

Net revenues for the three months ended April 29 rose 2 percent to $1.1 billion with a 5 percent increase in store revenues and a 4 percent decline online.

The company’s namesake business saw revenues drop 2 percent to $671 million while Aerie continued to press ahead with revenues up 12 percent to $359 million.

AEO is adjusting for the second quarter and also closely watching for how consumer behavior evolves.

Jennifer Foyle, president, executive creative director at AE and Aerie, told analysts: “I am here as the optimist. We haven’t hit Memorial Day, our stores business really performed nicely…in Q1 so when these kids get out of school I am hoping they like what they see.”

In the first quarter, Foyle said the company’s products “showed up well” in stores and online and that while average unit retail prices slipped 3 percent, they were still up over 20 percent from pre-pandemic levels.

“Aerie had a strong quarter with double-digit revenue growth and positive comp growth,” she said. “We saw an incredible customer response to new styles in our core apparel collection across fleece bottoms and tops.”

American Eagle’s revenues were down, but she noted, “We made progress across several major categories, for example, women’s tops I’m pleased to say, returned to growth.”

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